Merrill Lynch posts $4.9 billion loss

Merrill Lynch & Co last night reported a much larger-than-expected $4

Merrill Lynch & Co last night reported a much larger-than-expected $4.89 billion quarterly loss because of soured holdings of mortgages and other risky debt, and unveiled plans to sell billions of dollars of assets to shore up capital.

The loss was the fourth straight for Wall Street's third-largest investment bank, and was more than twice as big as analysts expected. Chief Executive John Thain called the quarter "difficult and disappointing."

Shares of Merrill fell $1.83, or 6 per cent, to $28.90 in after-hours trading. They had risen $2.73, or 9.8 percent, during the day after JPMorgan Chase & Co posted better-than-expected second-quarter results.

Merrill said it signed a letter of intent to sell a controlling stake in its Financial Data Services unit, which provides mutual fund administrative services and offers retail banking products, to an undisclosed party in a transaction valuing the unit at more than $3.5 billion.

It also said it has completed and is helping finance the long-expected sale of its 20 percent stake in Bloomberg LP, the news and financial data company, to Bloomberg Inc for $4.43 billion.

The quarterly loss applicable to common stockholders equalled $4.97 per share, and compared with a profit of $2.07 billion, or $2.24 per share, a year earlier.

Excluding restructuring charges, Merrill lost $4.42 per share.

Merrill recorded $9.4 billion of write-downs from exposure to CDOs, residential mortgages, bond insurers and other investments.

It has written down about $40 billion since the credit crisis began a year ago, leading to net losses exceeding $19.2 billion. Merrill ousted former chief executive Stanley O'Neal last October.

Moody's Investors Service downgraded Merrill's long-term debt rating one notch to "A2," its sixth highest investment grade, and in line with Standard & Poor's equivalent rating.

"Management's options to sell assets or raise more common equity to offset unexpected losses are now reduced given the difficult industry and capital markets environment," Peter Nerby, a senior vice president at Moody's, wrote.

Results included losses of $3.5 billion from exposure to CDOs, $2.9 billion related to hedges, $1.7 billion from am investment portfolio of the company's US banks, and $1.3 billion from residential mortgages.

Mr Thain said he has reduced staffing by about 4,200 this year, leaving Merrill with about 60,000 full-time employees at the end of June. He also said Merrill is well-capitalized now, but will look at all options should it need more capital.