Merrill Lynch posted the worst quarterly loss in its 94-year history this morning, recording a fourth-quarter net loss of $9.91 billion, or $12.01 per share, compared to a profit of $2.35 billion, or $2.41 per share, a year earlier.
The New York-based brokerage house wrote down $11.5 billion in mortgage-backed securities and CDOs, along with $3.1 billion in adjustments to hedge them.
Because of the hefty write-offs, Merrill posted negative revenue of $8.19 billion, down from revenue of $8.39 billion a year earlier.
Analysts surveyed by Thomson Financial expected a loss of $4.93 a share on revenue of $399 million.
The full-year loss of $8.05 billion, or $9.69 cents per share, compared to a profit of $7.31 billion, or $7.59 per share, in 2006.
CDO exposure was $4.8 billion at the end of the fourth quarter, down from $15.8 billion three months earlier, while exposure to subprime mortgages fell to $2.71 billion from $5.66 billion.
“I think on the CDOs specifically, it is not likely these things are going to recover,” Merrill’s newly appointed CEO John Thain said in a conference call. “I think we are being conservative, but I don’t think that we are likely to get much back on these.
Additionally, the investment bank had $2.7 in exposure related to U.S. Alt-A mortgages and $9.6 billion related to residential mortgages outside the U.S. as of the end of 2007.
“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,” Thain said in the earnings release.
Earlier in the week, Merrill said it sold $6.6 billion of preferred stock to a group of investors including the Korean Investment Corp., the Kuwait Investment Authority and Mizuho Corporate Bank.
That’s in addition to the $5.6 billion Merrill raised from Singapore-based Temasek Holdings last month.
Regarding layoffs, Thain said they “are not going to be significant” and shouldn’t be a sizable share of the company’s 64,000-strong workforce.
Merrill Lynch was trading down $3.92, or 7 12%, to $51.17 in midday trading on Wall Street.
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