Banks worldwide may lose as much as US$400 billion from subprime mortgages, as at least one in four risky home loans go into default, analysts said on Monday.

Mike Mayo, an analyst at Deutsche Bank Securities Inc., estimated US$150 billion to US$250 billion of losses based on US$1.2 trillion of U.S. subprime loans, and an additional US$150 billion of losses on derivatives linked to subprime debt.

David Hilder, a Bear Stearns & Company analyst, also estimated a US$150 billion to US$250 billion loss on subprime home loans, in what he called a US$2 trillion market.

"Given our fundamental outlook, which is for rising inflows of non-performing loans in both mortgage and commercial loan portfolios, we believe the odds are in favour of the write-downs getting worse, rather than better," this year, Hilder wrote.

Banks including Citigroup Inc., Merrill Lynch & Co and Wachovia Corp have announced more than US$40 billion of write-offs this year as U.S. foreclosures set records and after investors stopped buying many kinds of risky debt.

Large banks may suffer

Mayo said large banks and brokerages may suffer US$100 billion to US$130 billion of the subprime losses. He said this could include US$60 billion to US$70 billion by year-end, including US$43 billion already reported.

In the fourth quarter alone, he said, Barclays Plc, HSBC Holdings Plc, Royal Bank of Scotland Group Plc and UBS AG might each need to write off US$5 billion, while Merrill Lynch might write off US$4 billion and Bank of America Corp US$1 billion.

Mayo's forecast assumes a 30 per cent to 40 per cent default rate and 40 per cent to 50 per cent loss rate. Hilder assumes a 25 per cent to 30 per cent default rate and 30 per cent to 40 per cent loss rate.

- Reuters