Merrill Posts Worst Ever Loss on Mortgage Writedowns

January 17, 2008 No Comments »

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.

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.

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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