MERRILL Lynch & Co posted its third straight quarterly loss and will cut about 3,000 jobs after at least US$6.5 billion of writedowns and a 40-percent drop in investment-banking fees.
The first-quarter net loss of US$1.96 billion, or US$2.19 a share, compared with earnings of US$2.16 billion, or US$2.26, a year earlier, the third-biggest United States securities firm by market value said yesterday in a statement. Analysts had predicted a loss of US$1.72 billion, based on estimates compiled by Bloomberg News.
John Thain spent his first four months as chief executive officer selling more than US$12 billion of equity to bolster capital and overhauling risk-management practices after more than US$20 billion of credit-market losses. Merrill's stock has fallen 50 percent in the past 12 months, trailing larger New York-based rivals Goldman Sachs Group Inc and Morgan Stanley. Thain said yesterday he expects "more difficult" months ahead.
"The current environment is still tough," said Rose Grant, managing director in the investment-advisory division of Boston-based Eastern Bank Corp, which owns about 66,000 Merrill shares. "People are still reluctant to buy certain types of assets, and I don't think we'll see the end of that until later this year."
The first-quarter writedowns included US$2.6 billion to account for the plummeting value of mortgage-related bonds, including collateralized debt obligations. Merrill also reduced the value of bond insurance contracts by US$3 billion, and lowered the value of leveraged loans by US$925 million.
Moody's Investors Service yesterday said it may cut Merrill's credit rating for the second time in six months, citing "deteriorating conditions in the mortgage market" and the potential for US$6 billion of writedowns in addition to those announced in the past three quarters. Last October, Merrill's rating was lowered one level to A1, the fifth-highest of 10 investment-grade ratings.
Merrill's total revenue fell 69 percent to US$2.9 billion in the first three months of 2008 from a year earlier. That included a 7-percent increase to US$3.3 billion at the brokerage unit, the world's biggest with a network of 16,660 financial advisers.
Fixed-income trading revenue was negative US$3.38 billion and equity-trading revenue was US$1.88 billion, down from US$2.39 billion a year earlier.