Print

Mail

wiki links

Brokerage Merrill Lynch's quarterly loss hits record

Merrill Lynch & Co, the world's largest brokerage, lost nearly US$10 billion in the fourth quarter, its biggest quarterly loss since it was founded 94 years ago, after writing down US$14.6 billion in investments slammed by the ongoing credit crisis.

Merrill became the third of the five biggest Wall Street investment banks to post a loss for the quarter after taking massive write-offs related to the shrinking value of securities backed by mortgages that have soured as borrowers have been unable to repay them on time.

Merrill Lynch posted a net loss after preferred dividends of US$9.91 billion, or US$12.01 per share, compared to a profit of US$2.3 billion, or US$2.41 per share, a year earlier.

Results missed Wall Street's projections for a loss of US$4.93 per share, according to Thomson Financial. However, analysts have not been able to make accurate projections since the summer, when investment banks began taking on large losses because of the collapse of the subprime mortgage market.

Merrill shares tumbled US$2.22, or 4 percent, to US$52.90 in premarket electronic trading.

The New York-based brokerage marked down US$11.5 billion from mortgage-backed securities and an additional US$3.1 billion in adjustments to hedge positions on them.

"While the firm's earnings performance for the year is clearly unacceptable, over the last few weeks we have substantially strengthened the firm's liquidity and balance sheet," John Thain, Merrill's new chairman and chief executive, said in a statement.

After joining Merrill Lynch last month, Thain has addressed its balance-sheet woes by selling a commercial-finance unit. Merrill Lynch has also secured almost US$13 billion in capital investments, mostly from foreign wealth funds in Singapore, Korea and Kuwait.

Merrill needed the extra capital after steep losses in the second half of last year led to its first annual loss since 1989.

As for the fourth quarter, Merrill noted its fixed income, currencies and commodities business had significantly reduced client flows and decreased trading opportunities.

The business also significantly reduced its exposure to collateralized debt obligations, or CDOs.

Equity trading revenue jumped 23 percent amid "substantial" growth in client volume.

But, because of the write-offs, Merrill Lynch posted negative revenue of US$8.19 billion, down from US$8.39 billion a year earlier.
This story has been viewed 724 times.