Merrill Faces Additional Mortgage Losses
According to senior executives at Merrill Lynch, the company is likely to post a first-quarter loss on write-downs between $6 and $6.5 billion.
To date, Merrill has written down $24 billion worth of investments related to subprime lending. Unlike earlier write-downs at Merrill and other Wall Street investment banks, however, the latest round of write-downs is not solely tied to subprime loans. Instead, Merrill’s expected first quarter write-down is linked to commercial real-estate mortgage debt exposure and other types of loans as well as subprime loans. Unfortunately, this suggests that Merrill’s problems are expanding into other areas of its business. This does not bode well for the future.
CNBC reports that Merrill recently asked its trading desk to unload inventory in an effort to reduce the size of its balance sheet and prop up its credit rating.
Analysts surveyed by Thomson Financial are expecting Merrill to post a loss of approximately $1.90 per share. Estimates range from a loss of $3.00 to 68 cents per share.
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