Her forecasts were issued late Wednesday, after bank shares tumbled following her decision a day earlier to slash estimates for Citigroup, Bank of America, JPMorgan Chase, and Wachovia, the largest U.S. banks.
Ms. Whitney said Citigroup's first-quarter write-down could total $13.12 billion and that write-downs in the sector could top $50 billion.
Many expected the fourth quarter to be the 'kitchen sink' for the industry," Whitney wrote in a separate report dated Thursday. "First-quarter results (will) be a rude awakening."
In October, Whitney correctly predicted that Citigroup would cut its dividend and raise $30 billion of capital. She expects more banks to seek new capital, with Citigroup "most needing of the swiftest and largest capital raise."
Whitney now expects Merrill to lose $3 per share in the first quarter, and tripled her projected write-down from $2 billion. She had previously forecast a profit of 45 cents per share. The analyst also cut her 2008 profit-per-share forecast to 20 cents from $4.
Whitney wrote that Merrill faces write-downs of $1.84 billion on collateralized debt obligations, $1.17 billion on below-prime "Alt-A" home loans, $950 million on leveraged loans to fund buyouts, $571 million on commercial mortgages and real estate, and $1.5 billion of other write-downs.
The analyst also wrote that it was unclear whether Chief Executive John Thain would try to raise more capital, perhaps through hybrid securities, after having raised $12.8 billion since December. She also said Merrill faces a "highly disruptive year" of reorganization and downsizing.
UBS, meanwhile, may suffer a first-quarter loss of $2.75 per share, Whitney wrote. She previously forecast a profit of 72 cents per share. The analyst cut her 2008 profit per share forecast to 45 cents from $3.70.
Whitney wrote that UBS faces write-downs of $6.86 billion on CDOs, $3.19 billion on Alt-A loans, $650 million on leveraged loans and $355 million on commercial real estate.
UBS has been the European bank hit hardest by the U.S. subprime mortgage crisis. It has reported about $18 billion of subprime-related losses, and estimated about $80 billion of remaining exposure to other investments that some analysts and investors consider risky.
Whitney gives both banks' shares an "underperform" rating.