Merrill Lynch posts steep first-quarter loss on write-downs
NEW YORK -- Merrill Lynch & Co., the world's largest brokerage, on Thursday said it would cut 4,000 jobs after more than $6 billion fresh write-downs pushed it to a loss for the first quarter.
These write-downs caused Merrill Lynch to lose $2.14 billion, or $2.19 per share, after paying preferred dividends, compared to a profit of $2.11 billion, or $2.26 per share, a year earlier.
The New York-based firm posted negative revenue in its fixed-income trading business and a 40 percent slump in investment banking fees. This caused total revenue to slip 69 percent to $2.93 billion from $9.6 billion a year earlier.
Results missed Wall Street projections for a loss of $1.99 per share on $3.7 billion of revenue, according to analysts polled by Thomson Financial.
Merrill Lynch, the third-largest U.S. securities firm by market value, has been slammed by the global credit crisis that roiled markets since last summer. Risky bets in mortgage-backed securities have led to nearly $200 billion of write-downs _ with Merrill Lynch contributing at least $24 billion to that amount.
Despite the turbulence, Merrill Lynch Chief Executive John Thain said the company has $82 billion of excess liquidity to help protect against choppy market conditions. He said Merrill Lynch remains "well capitalized."
After joining Merrill four months ago, Thain pledged to clean up the brokerage's balance sheet and take steps to make it more profitable. He already secured more than $12 billion worth of new capital, and now has unveiled a plan to trim the company's ranks.
Merrill said it will record a restructuring charge of $350 million in the current quarter for the layoffs, which will reduce its headcount by 10 percent in areas outside of financial advisers and investment associates. The entire company has about 63,000 employees globally.
During the first quarter, Merrill Lynch said it suffered a $1.5 billion write-down linked to asset-backed securities, and a $3 billion write-down tied to the value of bond insurance contracts. The brokerage also lowered the value of leveraged loans by $925 million.
It reported that fixed-income trading revenue was $3.38 billion because of the tightening credit markets. Equity-trading revenue was $1.88 billion, down from $2.39 billion a year earlier.
Meanwhile, debt underwriting fell to $231 million from $586 million last year. Stock underwriting revenue fell to $199 million from $363 million a year ago.
Shares of Merrill Lynch fell 49 cents to $44.40 in premarket trading after closing Wednesday at $44.89. The stock is down 53 percent from where it traded one year ago.