Citi Faces $8B More in Writedowns: Analyst

After Merrill Lynch (MER Quote) sold a chunk of its most complex mortgage-backed securities at a steep discount Monday, investors should be prepared for the possibility of more writedowns at Citigroup (C Quote) this quarter, warns one analyst.

Deutsche Bank analyst Mike Mayo predicts that Citi will take third-quarter writedowns of roughly $8 billion on its collateralized debt obligations, according to a note published early Tuesday. He also says that Citi may have to raise capital sooner rather than later as a result of the writedowns.

Citi still has $22.5 billion of net CDO exposure as of the end of June. It "could have another $7 billion of writedowns," Mayo writes. "In addition, we estimate a $1 billion loss on its remaining $2 billion exposure with monoline insurers." ...