Merrill Lynch takes $14bn write-down
New York, January 17, 2008
Merrill Lynch & Co on Thursday posted a quarterly loss of nearly $10 billion after write-downs and adjustments totalling $14.1 billion as bad subprime mortgage bets forced the brokerage to sell stakes in the company to foreign investors to raise capital.
Recently named chief executive John Thain said in a conference call that the world's largest brokerage will ease risk taking but that it has enough capital to move forward after $12.8 billion in infusions from US and foreign investors.
"The loss seems higher than expected," said Peter Boockvar, an equity strategist at Miller Tabak & Co in New York. "The write-down, I guess, was large, about in line. But we knew that it was going to be bad."
Analysts expected Merrill's write-down to land anywhere from $10 billion to $15 billion. For the year, Merrill's subprime mortgage-related losses totaled nearly $23 billion.
Merrill shares were down 2.7 percent in pre-market electronic trading in what analysts said was uncertainty about whether there could be still more write-downs ahead.
Asked if the latest write-downs meant the company was wiping the slate clean, Boockvar noted that prices on mortgage-related securities continue to fall. "So yeah, the slate is clean for today, but prices continue to drop."
Merrill reported a fourth-quarter net loss of $9.8 billion, or $12.01 a share, the largest in the company's history. It turned a profit of $2.3 billion, or $2.41 a share, in the year-ago period.
The results eclipsed the $2.3 billion loss in the third quarter when Merrill recorded $8.4 billion in write-downs. Thain in a statement called the results "clearly unacceptable." But in the past month, Merrill has fortified its balance sheet with nearly $13 billion in capital infusions from US and Asian investors. - Reuters