The failure of Bear Stearns has raised questions about the health of other major banks and securities firms.

While it’s unlikely that another major player will go under, I believe that several, including Citigroup and Merrill Lynch, remain in fragile condition.

Here’s a brief prognosis for a few of the biggest financial institutions, from most vulnerable to least.

Citigroup:

The nation’s largest bank has recently seen its share price drop below book value ($22.74 as of Dec. 31), a sign that investors see more losses ahead. Merrill Lynch analysts say that charge-offs on loans and investments for the first quarter could cost Citi $18 billion, leading to a loss for the period.

Oppenheimer bank analyst Meredith Whitney estimates Citigroup will have to boost reserves by more than $24 billion this year and again next year to cover credit losses. That total easily exceeds last year’s $17.4 billion and $6.7 billion in 2006.

Not everyone has given up on Citi. I believe we are in the midst of a panic that is similar to the panic that existed in the early '90s…..BUT you won't find a single human being on the planet to say anything positive about Citigroup, which is why you may want to own it.

Merrill Lynch:

I think Merrill is "the riskiest” of the large investment banks. It is weighed down with $30.4 billion in subprime collateralized debt obligations and the "worst”' liquidity ratio among major securities firms — 52 percent.

Goldman Sachs analyst William Tanona recently cut his first-quarter earnings estimate for Merrill by more than 70 percent to 25 cents a share. He predicts another $4 billion worth of write-downs for the firm during that period.

Lehman Brothers:

After Bear Stearns fell, talk arose that Lehman, the smallest of the remaining big four investment banks, would follow. Tuesday’s earnings report silenced much of that chatter.

Lehman produced profits of $489 million, or 81 cents a share, in the quarter ended Feb. 29, well above analysts’ estimate of 72 cents a share. Merger advisory fees surged 34 percent to $330 million, and investment-management revenue rose 39 percent to $968 million.

Surprisingly, they've taken few hits but that didn't happen by mistake. i think this is prudent risk management.

Goldman Sachs:

The strongest of the investment banks reported Tuesday that net income registered $1.51 billion, or $3.23 per share, in the quarter ended Feb. 29, far exceeding analysts’ average estimate of $2.60 per share.

Goldman’s revenue for currency, commodity and fixed-income trading stood at or near record levels for the period.

Goldman once again shines in difficult times. Times like these do separate the star performers. This was indeed a stellar report.

JPMorgan Chase:

It has emerged in the best shape among the major commercial banks by shunning much of the risky mortgage bonds and other toxic paper embraced by many of its competitors.

Its strong position enabled JPMorgan to swoop in and pick up Bear Stearns for the bargain basement price of $2 a share, with the Federal Reserve assuming much of the risk on Bear’s assets.

Suddenly JPMorgan CEO Jamie Dimon is a hero on Wall Street. I guess this is a transformative deal for Jamie Dimon. Now he is viewed as a senior financial statesman.

Who did I miss? Your thoughts are greatly appreciated

Thanks for your consideration.