Fourth Quarter Loss of $9.8 billion for Merrill Lynch (AP) (17-01-2008)

NEW YORK (AP) -- World’s largest brokerage Merrill Lynch & Co. announced losses of nearly $10 billion in the last three months of 2007, its biggest quarterly loss since it was founded 94 years ago, after writing down $14.6 billion of investments slammed by the ongoing credit crisis.

The company is the third of the five biggest Wall Street investment banks to post a loss for the quarter following massive write-offs related to the shrinking value of asset backed securities that have lost their value in the wake of the subprime crisis. Merrill Lynch’s loss is only slightly larger than the one posted earlier this week by the nation's largest bank, Citigroup Inc., the largest deficit in its 196-year history.

Both these as well as signs appearing from economic indicators on housing, spending and manufacture are intensifying fears of a recession, and have increased pressure on the government for an economic stimulus plan.

Merrill Lynch posted a net loss after preferred dividends of $9.91 billion, or $12.01 per share, compared to a profit of $2.3 billion, or $2.41 per share, a year earlier.

Wall Street analysts had been forecasting a loss of $4.93 per share, according to Thomson Financial. However, they have not been able to make accurate projections since the summer, when investment banks began taking large write-downs and boosting reserves due to the collapse of the subprime mortgage market.

Merrill shares tumbled $1.84, or 3.3 percent, to $53.25 in premarket electronic trading.

The New York-based brokerage marked down $11.5 billion from mortgage-backed securities, and an additional $3.1 billion in adjustments to hedge positions on them.

"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," said John A. Thain, Merrill's new chairman and chief executive, in a statement.

Merrill Lynch secured almost $13 billion worth of fresh capital, mostly from foreign wealth funds in Singapore, Korea, and Kuwait. Thain also addressed the balance-sheet woes by selling a commercial-finance unit.

After joining Merrill Lynch last month, Thain pledged to clear the brokerage's books and shore up its capital base to better position it amid the credit market turmoil. He replaced Stan O'Neal, who was ousted after big bets on subprime mortgages backfired as homeowners began to default on their loans at an alarming rate.

Source: Yahoo