Although the biggest subprime-related hits to big banks may be over, more heavy losses are forecast.

The bad news will continue for Merrill Lynch and UBS, according to a recently released analyst’s note from Oppenheimer & Co.

Merrill may post a loss of $3 per share and write down $6 billion of assets, Whitney wrote in a report dated yesterday. Zurich-based UBS will lose $2.75 per share after writing down about $11 billion, she said. Sanford C. Bernstein & Co. also abandoned its prediction of a profit for Merrill today.

At least a dozen analysts have reduced profit estimates in the past six weeks for the biggest banks and securities firms on expectations of more writedowns related to the collapse of the subprime mortgage market. Credit losses for banks worldwide already total about $208 billion, according to Bloomberg data.

Source: Bloomberg

 While the big boys take a pasting over the subprime fiasco, small banks may the perfect investment.

“Many small banks are trading at book value, or less,” says DailyWealth editor Steve Sjuggerud.

“The good part about the small banks is, they generally stick to their knitting – taking deposits and then making loans. They simply earn a spread… They charge more interest on the loans they make than they pay out as interest on their deposits.”