NEW YORK (AP) Merrill Lynch & Co. on Thursday reported a $4.9 billion loss amid massive write-downs from soured mortgage positions and other risky investments, and unveiled plans to raise money by unloading assets.
The world's largest brokerage posted its fourth straight quarterly loss as it struggles to shore up a balance sheet battered by the global credit crisis. Merrill Lynch took $9.4 billion of charges and write-downs from mortgage-backed securities, unprofitable hedge positions, and residential mortgage exposure.
The new charges come on top of nearly $29 billion in write-downs that the New York-based brokerage had already taken because of tightening credit markets. Global banks and brokerages have been forced to take some $300 billion of write-downs in the past year.
Merrill also said it had reached a deal to sell its 20 percent stake in news and data provider Bloomberg LP for $4.43 billion, and is close to selling its controlling interest in Financial Data Services Inc. for upward of $3.5 billion.
"This was a difficult and disappointing quarter in terms of the bottom line," Chief Executive John Thain told analysts on a conference call. "But, in spite of this loss, we likely have in our last two quarter more than replaced the capital that we lost."
Merrill lost $4.89 billion, or $4.97 per share, after accounting for the payment of dividends for the three months ended June 30. That compares to a year-ago profit of $2.01 billion, or $2.24 per share. The broker reported negative revenue of $2.11 billion versus revenue of $9.46 billion a year earlier.
Analysts had expected that Merrill would lose $1.91 per share, according to Thomson Financial.
The results were swiftly panned by analysts and investors since the market expected significantly less write-downs during the quarter. The stock, which closed up 9.8 percent at $20.73 in regular trading, plunged in after-hours trading after the results were announced.
The debt-rating agency Moody's downgraded Merrill Lynch's debt within minutes after the results were released. Standard & Poor's affirmed the broker's ratings, though it had downgraded them just a few weeks ago.
Peter Nerby, an analyst at Moody's, said Merrill's options for selling assets or raising equity capital to offset losses "are now reduced given the difficult industry and capital markets environment."
Merrill reported $3.5 billion of losses from its exposure to collateralized debt obligations, which are financial instruments tied to mortgages. In addition, it lost $2.9 billion from wrong-way hedges it bought from bond insurers.
It also took another $1.7 billion in losses from its investment portfolio of its U.S. banks, and $1.3 billion in write-downs from exposure to residential mortgages.