Merrill Lynch bruised by $9.8 billion loss

Agence France-Presse - 1/17/2008 4:56 PM

http://news.id.msn.com/topstories/article.aspx?cp-documentid=1195116

Merrill Lynch, one of America's biggest investment banks, lost its money-making stride Thursday as it announced the largest quarterly loss in its history at 9.8 billion dollars.
Merrill, known for its poised bull logo, blamed its huge losses on the US housing slump and stricken credit markets. The New York-based investment firm's new chief executive John Thain said such losses were "unacceptable," and told shareholders he was fighting to improve Merrill's battered finances.

Mortgage investment losses and credit woes forced Merrill to write down 14.1 billion dollars during the fourth quarter of 2007. Merrill, like rival banks including Citigroup and Morgan Stanley, has written off billions of dollars in investments tied to subprime mortgages granted to Americans with poor credit.

Foreclosure rates on subprime loans skyrocketed last year amid a crippling housing market downturn and mounting economic uncertainty. Thain, who took over as CEO in November following the resignation of Stan O'Neal, said separately in an interview with the CNBC business television channel that he could not guarantee Merrill would not report more writedowns.
Merrill's loss for the last three months of the year compared with a net profit of 2.3 billion dollars during the fourth quarter of 2006. It reported loss-making earnings per share of 12.01 dollars, compared with a profitable 2.41 dollars a year earlier. Analysts had anticipated a loss of 4.57 dollars per share.

Revenues tumbled by around 16 billion dollars from 8.4 billion dollars in the fourth-quarter of 2006. "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 a statement.

Merrill reported a net loss for 2007 of 7.8 billion dollars compared with a net profit of 7.5 billion dollars in 2006. The Wall Street investment house has been selling off some of its business units and racing to raise cash from foreign investors in an effort to rebuild its finances.
Merrill had announced Tuesday that it had won fresh backing totaling 6.6 billion dollars from from the state-run Kuwait Investment Authority, the Korean Investment Corporation, a private Saudi Arabian fund and other investors. None of the investors will have any control over its management or operations, according to Merrill executives.

Thain told CNBC that Merrill was trying to raise more cash than it has lost. He said the bank had reviewed selling its 20 percent stake in the Bloomberg news and financial information service, but decided to retain its holding. Although Merrill has endured prior losses -- following the 9/11 terror attacks and during global financial shocks -- its recent losses are the biggest in company history.

Thain voiced optimism saying "our businesses are doing really, really well," but some shareholders have criticized the bank's board of directors. The CtW Investment Group, which holds a stake in Merrill, slammed the bank's board late Wednesday for "oversight failures" that had cost shareholders billions of dollars in losses.

"Merrill Lynch's appalling failure to manage risk destroyed 43 percent of the firm's value in one year and contributed to a broader crisis of confidence now afflicting the financial markets," CtW executive director William Patterson said. Merrill's shares were down 5.5 percent at 52.01 dollars in late morning trading.(*)