Feb. 26 (Bloomberg) -- Goldman Sachs Group Inc., the world's biggest securities firm, had its first-quarter earnings estimate cut by Merrill Lynch & Co. for the second time this month as the subprime mortgage collapse infects other markets.

Merrill's Guy Moszkowski, Institutional Investor magazine's top-rated U.S. bank analyst, cut his earnings-per-share estimate for New York-based Goldman by 42 percent, to $2.31 from $3.97. He lowered his 2008 prediction to $16.62 per share from $18.28.

``With market problems extending beyond residential mortgages to commercial property, corporate debt and global equity valuations, Goldman Sachs is not unscathed,'' the 50- year-old Merrill analyst wrote in a note to investors today.

Banks and securities firms have disclosed about $163 billion of credit losses and writedowns since the beginning of last year amid the worst U.S. housing slowdown in a quarter century. Goldman, after dodging losses related to subprime mortgages last year and booking record profit, will join rivals in reporting lower earnings this quarter as stocks, leveraged buyout loans and office buildings lose value, Moszkowski said.

Moszkowski's new estimate for Goldman is 32 percent below the $3.33 average in a Bloomberg survey of 18 analysts. He lowered his prediction on Feb. 1 by 20 percent, citing a decline in mergers and acquisitions and lower credit ratings on asset- backed securities.

``Market action in February has been such that we need to take another look,'' Moszkowski wrote today.

Revenue Expectation

Moszkowski also lowered his first-quarter net revenue estimate for Goldman to $7.5 billion from $9.6 billion. The analyst said he recently met with Goldman executives including Co-President Jon Winkelried and David Viniar, the chief financial officer.

Goldman's first-quarter estimates have been reduced in the past month by analysts at Sandler O'Neill & Partners LP; UBS AG; Keefe, Bruyette & Woods Inc.; Lehman Brothers Holdings Inc.; Fox-Pitt Kelton Cochran Caronia Waller; Citigroup; and Sanford C. Bernstein & Co.

More writedowns may force Citigroup Inc., the biggest U.S. bank by assets, to post its second-straight loss in the first quarter, Oppenheimer & Co. analyst Meredith Whitney said yesterday.

A gauge of financial stocks in the Standard & Poor's 500 Index has dropped 5.6 percent this month after finishing last year with the steepest decline among 10 industry groups in the broader index. Goldman fell $4.66, or 2.6 percent, to $172.70 at 4 p.m. in New York Stock Exchange composite trading. The stock is down almost 20 percent this year.

To contact the reporters on this story: Christine Harper in New York at charper@bloomberg.net; Nandini Sukumar in London at nsukumar@bloomberg.net.

Last Updated: February 26, 2008 17:04 EST