NEW YORK (Reuters) - Lehman Brothers Inc strategists expect financial institutions worldwide to write down as much as $400 billion for bad debts by the end of 2008, and said competing estimates of as much as $1.2 trillion seem implausible.

If Lehman is right, then the worst of writedowns by banks, brokerages and insurers may have passed.

But many of the riskier financial markets may not have bottomed out, Lehman strategists led by Chief Global Fixed Income Strategist Jack Malvey wrote.

Goldman Sachs & Co estimated last month some $1.2 trillion of global credit losses. U.S. banks, brokerages, hedge funds, and government-sponsored enterprises such as Fannie Mae FNM.N could account for $460 billion of credit losses, Goldman said.

Lehman’s forecast is far lower. “Himalaya-like guestimates, ranging from $600 billion to an Everest $1.2 trillion, seem highly improbable, in our opinion,” the Lehman strategists wrote.

Financial institutions reeling from the global credit crunch have recorded $291.8 billion of writedowns so far, the Lehman team wrote. That has been partially offset by about $181.6 billion of equity infusions, but still leaves banks with about $110 billion less capital.

Given that financial institutions borrow most of the money they lend or otherwise invest, that could translate to about $1.5 trillion less liquidity globally, the strategists said.

The worst scares for financial institution stability may have passed in March, but riskier markets such as stocks and junk bonds may have further to drop, Lehman strategists said.

Financial markets have grown much more optimistic about banks and brokers this week. On Tuesday, UBS AG UBSN.VX said it was recording a $19 billion write-down, and Lehman Brothers Holdings Inc LEH.N said it sold $4 billion of dilutive convertible preferred securities.

But U.S. and European financial stocks rallied on the news, amid investor hopes the worst may have passed for banks and brokers.

Many analysts argue there are still clouds on the horizon for the global economy.

U.S. corporate bond spreads, a measure of how much extra yield over safe Treasuries investment-grade companies must pay to borrow, are on average three times as high as they were a year ago, according to Merrill Lynch & Co indexes.

And financial companies may have to raise capital in the future on increasingly onerous terms, after their recent bout of fund-raising, analysts have said.