Merrill Lynch stays in the red for third consecutive quarter

US investment bank Merrill Lynch reported its third straight quarter in the red on Thursday after another massive write-down on assets from its adventure in the risky US subprime mortgage market.

The Wall Street giant said it recorded a net loss of US$1.96 billion for the first quarter of this year, compared with a net profit of US$2.16 billion a year ago, and announced it would slash 10 percent of its workforce.

Earnings per share were US$2.19, sharply higher than analysts’ consensus forecast of US$1.99.

It was the third loss-making quarter in a row, after a loss of US$9.8 billion in the fourth quarter of last year and US$2.2 billion in the third quarter.

Revenue for the quarter ending March 28 fell to US$2.93 billion from last year’s US$9.6 billion as Merrill wrote down US$9 billion in assets.

The bank wrote down some US$6.6 billion in soured investments related to the US mortgage market and US$3 billion on assets tied to municipal bond insurers.

“Despite this quarter’s loss, Merrill Lynch’s underlying businesses produced solid results in a difficult market environment,” Merrill Lynch chairman and CEO John Thain said in a statement.

“The firm’s 82-billion-dollar excess liquidity pool has increased from year-end levels, and we remain well-capitalized,” the statement said.

Merrill is the US bank hardest hit by a credit squeeze that erupted in August amid rising defaults on US subprime mortgages as a housing boom collapsed. Worldwide, Merrill is the second most impacted bank, after Swiss giant UBS.

Merrill reported an annual loss of US$7.8 billion last year on write-downs of US$11.5 billion.

Most of the rout in Merrill’s accounts for the past three quarters came from exposure to the meltdown in the high-risk subprime home-loan sector, where credit was given to customers with weak credit histories.

In contrast to Merrill’s first-quarter losses, Wall Street peers Goldman Sachs, JPMorgan Chase, Lehman Brothers and Morgan Stanley announced profits, although on average they were halved.

Even Bear Stearns, which nearly collapsed early last month from the credit crunch and was rescued in a government-funded takeover by JPMorgan, squeaked out a profit of US$115 million.

To buffer its pain, Merrill announced on Thursday it would lop off 4,000 employees, or 10 percent of its workforce, from year-end levels.

Most of the job losses would come in the investment banking division and support services. Merrill said it had already shrunk its workforce by some 1,000 jobs in the first quarter, particularly in its Franklin mortgage lending business.

The bank plans to record a US$350 million charge in the second quarter related to the job cuts, which were expected to generate cost savings of US$800 million on an annualized basis.

Moody’s Investors Services said it was considering downgrading Merrill’s long-term credit ratings, citing continued deteriorating conditions in the mortgage market and “increased expected losses” on Merrill’s portfolio.