June 19 (Bloomberg) -- UBS AG, the European bank with the biggest losses from the U.S. subprime collapse, may book more writedowns in the second quarter than rivals Credit Suisse Group and Deutsche Bank AG, analysts at Goldman Sachs Group Inc. said.

Earnings at Zurich-based UBS may be lowered by 4 billion Swiss francs ($3.9 billion), London-based analysts including Chris Turner and Christoffer Malmer said in the note. Credit Suisse may write down 1.15 billion francs and Frankfurt-based Deutsche Bank 480 million euros ($748 million).

``Based on the movements of credit market indicators since the end of March, we believe that European banks could continue to face negative value adjustments,'' the analysts wrote. Goldman also reduced forecasts for earnings per share for the three banks because of the ``challenging environment in capital markets.''

Banks and securities firms worldwide are grappling with $397 billion in losses and writedowns amid a seizure in the credit markets. Lenders have shed 83,000 jobs globally since the crisis began, are offering fewer loans and have raised $303 billion in new capital to shore up their balance sheets.

UBS fell 1.8 percent to 24.34 francs and Credit Suisse declined 1.1 percent to 49 francs at 11:46 a.m. in Swiss trading. Deutsche Bank, Germany's biggest bank, lost 1.1 percent to 60.86 euros in Frankfurt.

Subprime Losses

Morgan Stanley, the second-largest U.S. securities firm after Goldman, reported a 57 percent drop in second-quarter earnings yesterday as revenue from asset management and investment banking declined while equities and fixed-income traders generated less profit.

UBS has raised about $29 billion to shore up capital after more than $38 billion in writedowns on subprime-infected assets. The Swiss bank said last month it may face further markdowns.

Goldman forecast UBS's second-quarter losses will mainly come from the declining value of subprime-related collateralized debt obligations and securities backed by bond insurers. The bank may book a 1 billion-euro loss on its own debt.

Credit Suisse will mark down the value of CDOs, which repackage bonds into new securities with varying risks, as well as 546 million francs on its own debt, Goldman said. Deutsche Bank will face ``relatively modest'' writedowns, mostly related to bond insurers, the analysts said.

Deutsche Capital Increase?

The German bank may need to raise 3 billion euros in new capital to satisfy the regulators' desire for capital strength ``in a post crisis world,'' said David Williams, a London-based analyst at Fox-Pitt Kelton, in a note. Deutsche Bank's core equity tier 1 ratio of 9.2 percent, though ``robust'' compared with European peers, fares ``less well'' against U.S. investment banks, he said.

The bank would likely prefer to get a new long-term investor on board, such as a sovereign wealth fund, than sell new shares, Williams said. Chief Executive Officer Josef Ackermann said last month there were no plans for a capital increase.

UBS, Switzerland's biggest bank, had its stock rating cut to ``neutral'' from ``outperform'' today by smaller Swiss rival Credit Suisse, which cited a lower earnings outlook at the company's wealth-management unit.

``Now that the writedowns have been reduced to manageable levels,'' management faces ``the challenge of rebuilding the franchise,'' analysts Daniel Davies and Rupak Ghose said in a note to clients today. ``We expect this to be a difficult job.''

UBS money-management clients probably withdrew a net 41 billion francs in the second quarter, JPMorgan Chase & Co. analysts led by Kian Abouhossein said in a note yesterday.

Clients of UBS, which oversees 2.76 trillion francs, removed a net 12.8 billion francs in the first quarter, the first outflow in almost eight years. The London-based analysts at JPMorgan also predicted an additional 5 billion francs of asset writedowns at UBS this year.

To contact the reporter on this story: Aaron Kirchfeld in Frankfurt at akirchfeld@bloomberg.net.

Last Updated: June 19, 2008 05:53 EDT