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Shares of Lehman Brothers Holdings Inc (LEH.N) fell as a great quantity as 9 percent in morning trade Thursday, in the rear of a Citigroup analyst forecast important losses for the fourth largest U.S. investment bank, as long as a journal reported that an intended asset sale had collapsed.

Citigroup analyst Prashant Bhatia widened his third-quarter disadvantage calculate by reason of Lehman Brothers Holdings Inc (LEH.N). Bhatia and Lehman Brothers Inc analyst Roger Freeman also cut their third-quarter earnings estimates for Goldman Sachs Group Inc (GS.N) and Morgan Stanley (MS.N).

"We are lowering our third-quarter estimates to reflect the difficult operating environment, characterized by lower client-related trading volumes and losses on hard-to-sell assets," Citigroup's Bhatia reported.

Bhatia expects Lehman to be conscious of fresh asset-related writedowns of $2.9 billion. He expects $1.8 billion in writedowns at Goldman and $1.7 billion at Morgan Stanley.

"Based on further deterioration in several indices, we expect further writedowns, primarily related to mortgage assets," Bhatia wrote in every August 20 short letter to clients.

Lehman analyst Roger Freeman said writedowns for this quarter would come from exposures to prime residential mortgages, subprime mortgages and securities, Alt-A residential mortgages and securities, collateralized obligation obligations, and leveraged loans.

Commercial mortgages have also experienced price depreciation this quarter, at the same time that measured by dint of. widening commercial mortgage-backed securities spreads and a declension in the CMBX index, which tracks commercial-mortgage-backed securities, Freeman said.

These declines acquire accelerated in the past copulate of weeks, he said.

Banc of America Securities algebraist Michael Hecht said he expects bulky U.S. investment banks to face a "lackluster, low-visibility" environment end 2008, on account of their "still-large" balance-sheet exposure to residential and commercial mortgages.

Troubled-asset disclosures for U.S. brokers and asset managers totals $443 billion, down from $599 billion a quarter ago, Hecht said. He, however, added that in that place was still quite a "hangover" to work end for the industry.

Among the companies while burdened with his coverage, Lehman has the largest exposure to troubled possessions at about $72 billion, under which circumstances Morgan Stanley has the smallest at about $25 billion, Hecht said.

Financial services firms have recorded more than $400 billion in writedowns steady investments, largely as a result of the subprime mortgage crisis which has roiled global markets inasmuch as finally year.

THIRD-QUARTER OUTLOOK

Lehman's Roger Freeman and Citigroup's Prashant Bhatia were the latest among Wall Street research analysts to divide their outlook for U.S. investment banks.

Since the start of this month, analysts at Merrill Lynch, Fox-Pitt and Bernstein esteem cut their estimates during the term of Goldman and Morgan Stanley, while forecasting a third-quarter loss for Lehman.

Freeman on Thursday cut his third-quarter earnings estimates for Goldman to $1.70 a share from $3.77, and for Morgan Stanley to 75 cents a share from $1.13.

A further round of estimate cuts is most likely with Goldman's earnings and this will cause shares of the largest U.S. securities firm to be at the "greatest risk" through the end of the quarter, Freeman said.

Freeman rates Goldman and Morgan Stanley "equal-weight."

Citigroup's Bhatia cut his earnings estimates concerning Goldman to $2.50 a share from $4.50, and since Morgan Stanley to 75 cents a share from 76 cents.

He widened his third-quarter loss view for Lehman to $3.25 a share from 41 cents a share.

NEUBERGER SALE LESS LIKELY?

Bhatia, however, said he axiom a "lower probability" that Lehman would sell its Neuberger Berman business or raise capital in the near denomination.

Several Wall Street analysts own been speculating a potential sale of all or a portion of Lehman's asset-management business — a move mentioned in media reports as a possibility for weeks.

Experts estimate the business, whose core is Neuberger Berman, could be worth about $8 billion.

"Even under the potentially more rigid rating agency guidelines related to the amount of preferred securities in the capital mix, we take up beforehand that Lehman can absorb over $3 billion of after-tax losses without adding more common equity," Bhatia said.

Bhatia rates Lehman and Morgan Stanley "buy," and Goldman "gripe." He cut his price mark on the shares of Lehman to $35 from $50. Lehman shares were down 37 cents at $13.36 in morning trade on the New York Stock Exchange. Shares of Goldman and Morgan Stanley were down more than 1 percent at $156.00 and $37.02, particularly.

(Editing by Vinu Pilakkott)