Nov. 13 (Bloomberg) -- Bank of America Corp., the nation's second-largest bank, will need to write down $3.3 billion in debt securities that have lost value because of defaults on subprime mortgages, Citi Investment Research analyst Keith Horowitz said.

Citi is cutting its fourth quarter estimate for Bank of America by 41 percent to 85 cents a share, from $1.43, because of the possible writedowns and greater reserves for future loan losses, Horowitz wrote in a report today. Bank spokesman Scott Silvestri declined to comment on the Citigroup report.

Wall Street's largest banks and brokers will have to write down as much as $130 billion, including as much as $70 billion this year, because of the slump in subprime-related debt, Deutsche Bank AG analyst Mike Mayo said in a note yesterday. Citigroup Inc., Merrill Lynch & Co. and Morgan Stanley led more than $40 billion in writedowns of assets as record U.S. foreclosures hit the housing market, Mayo noted.

``Given the recent market events in October, we believe it's likely Bank of America will need to take a large hit of around $3.3 billion due to market declines in the value of these collateralized debt obligation positions,'' Horowitz wrote today. He rates the bank at ``buy,'' noting that it has $17 billion in unrealized gains from its investment in China Construction Bank and another $17 billion in unrealized gains related to options.

The biggest part of the expected writedowns this quarter relate to $15.5 billion in ``liquidity support'' that Charlotte, North Carolina-based Bank of America provided to asset managers on short-term funding for CDOs, Horowitz said. The bank disclosed its holdings of CDOS in a Nov. 9 regulatory filing.

Bank of America was the ninth largest arranger of CDOs in 2006 and 2007 with total issuances of $9 billion, the analyst said.

Bank of America rose 95 cents, or 2.2 percent, to $44.93 at 10:30 a.m. in composite New York trading.

To contact the reporter on this story: David Mildenberg in Charlotte at dmildenberg@bloomberg.net

Last Updated: November 13, 2007 10:38 EST