Bad debts lead to Merrill loss

The brokerage giant reported a net loss of $2.3bn from continuing operations, against a $3bn profit a year ago.

The losses were caused by exposure to bad mortgage-related debt, such as that in the crisis hit US sub-prime sector.

Merill is the latest bank to reveal its exposure to bad debt, with a write-down much larger than initially forecast.

'Difficult markets'

Merrill's admission follows similar warnings from Citigroup, Credit Suisse and UBS as the extent of the crisis in the US sub-prime loans sector becomes known.

"This is a bloodbath for certain"
Bill Fitzpatrick, Johnson Family Funds

"In light of difficult credit markets and additional analysis by management during our quarter-end closing process, we re-examined our remaining CDO [collateralised debt obligations] positions with more conservative assumptions," said Merrill chief executive Stan O'Neal.

"The result is a larger write-down of these assets than initially anticipated."

Analysts were taken aback at the size of the loss.

This is a bloodbath for certain," said Bill Fitzpatrick, analyst at Johnson Family Funds.

"It speaks very poorly to Merrill's risk management practices."

RELATED INTERNET LINKS
Merrill Lynch
The BBC is not responsible for the content of external internet sites