Merrill Lynch & Co Inc has reported its first loss in six years as a publicly traded company after writing down $7.9 billion (€5.54 bn) for bad bets on risky subprime mortgages and related securities.
Merrill Lynch's third-quarter net loss was $2.3 billion (€1.61bn), or $2.85 (€1.99) a share, from continuing operations in the third quarter, compared with a profit of $3 billion (€2.14 bn), or $3.14 a share, a year earlier.
More write-downs could be coming if the world's largest brokerage further cuts the value on its remaining $20.9 billion (€14.66 bn) exposure to collateralized loan obligations and subprime mortgages. Chairman and Chief Executive Stan O'Neal said the company is still working to resolve the impact of loans to people with weak credit.
Merrill Lynch shares fell about 3 per cent to $65.05 (€45.63), near a two-year low, in morning trading on the New York Stock Exchange.
Merrill was the only big Wall Street firm to post a third-quarter loss. And its write-downs - before hedges - were bigger than the combined $3.6 billion in write-downs and charges recorded by rivals Goldman Sachs Group Inc, Bear Stearns Cos Inc, Morgan Stanley and Lehman Brothers Holdings Inc.
The $7.9 billion of write-downs was more than the $5.5 billion Merrill forecast earlier this month. After re-examining its positions on collateralized debt obligations, it used more conservative assumptions for valuing those assets.
Merrill said the net write-down figure does not include a $967 million write-down, before fees, on commitments that include loans for takeovers.
O'Neal cited continued uncertainty in the market for risky subprime mortgages as defaults on those loans continue to escalate and sap the strength of the U.S. economy.
Merrill shares are down 28 per cent this year and fell before the third-quarter results were released as investors anticipated the bigger-than-expected write-downs.