USA: Merrill Lynch posts $2.3 billion loss on massive write-down
- 00:00:04
- ITN Source
USA: Merrill Lynch posts $2.3 billion loss on massive write-down
A 7.9 billion U.S. dollars (USD) bungle for financial power house Merrill Lynch was revealed on Wednesday (October 24). The company took that in write downs in the third quarter thanks to bad bets on risky subprime mortgages and related securities. It was the firms first net quarterly loss in six years. The world's largest brokerage reported a net loss of USD 2.3 billion, or USD 2.85 a share, from continuing operations, compared with profit of USD 3 billion, or USD 3.14 a share, in the year-ago period. "It's a problem that they had allowed this exposure to accumulate in the first place. It's something that took us by surprise and evidently took the management of the company by surprise as well," said Managing Director at Standard & Poor's, Scott Sprinzen. On the news, Standard & Poor's cut their crediting rating on Merrill Lynch, keeping a negative outlook, meaning another cut is likely over the next few quarters. The news sent Merrill shares, which have fallen about 30 percent this year, to a two-year low. "We don't have any particular concerns about their funding and liquidity, so we're not predicting doom and gloom for Merrill. Clearly the dust needs to settle there and there's going to be a reassessment evidently of their position in the mortgage business, but we're not saying with our downgrade that the future is clouded for Merrill," said Sprinzen. The USD 7.9 billion write-down was more than the USD 5.5 billion Merrill forecast earlier this month. After re-examining its positions on collateralised debt obligations, Merrill Lynch used more conservative assumptions for valuing those assets.
ITN Source | October 25, 2007
