Merrill Lynch reports $6bn write-downs, cuts 4,000 jobs


Merrill Lynch reports $6bn write-downs, cuts 4,000 jobs
US bank Merrill Lynch & Co has posted a nearly $2 billion (£1 billion) first quarter loss and announced it would cut 4,000 jobs.

The Wall Street bank was expected to post steep losses as the subprime crisis continues to take its toll. The $6 billion write-down will add to the $24 billion of write-downs Merrill Lynch has reported in prior quarters.

Merrill Lynch's quarterly net loss was $1.96 billion (£1 billion), compared with a profit of $2.16 billion (£1.1 billion) a year earlier.

The job cuts, which represent ten per cent of the company's workforce, will mainly affect staff in Merrill Lynch's investment banking arm.

The group had 63,100 employees at the end of the first quarter of 2008, a net decrease of 1,100 during the quarter, primarily related to the discontinuation of mortgage origination at First Franklin and the sale of ML Capital, Merrill Lynch said.

Merrill Lynch said the loss was due to net write-downs totalling $1.5 billion (£0.75 billion) related to US CDOs (collateral debt obligations), credit valuation adjustments of negative $3 billion (£1.5 billion), again related to CDOs, and losses on subprime mortgages.

"Despite this quarter's loss, Merrill Lynch's underlying businesses produced solid results in a difficult market environment," said John Thain, chairman and chief executive officer.

"The firm's $82 billion (£41 billion) excess liquidity pool has increased from year-end levels, and we remain well capitalized. In addition, our global franchise is positioned strongly for the future, and we continue to invest in key growth areas and regions."

More US banks are expected to reveal huge losses as a result of subprime exposure and a weakening economy.

Rival JP Morgan Chase said its first quarter profit had halved from last year when it released results this week, but still posted a $2.4 billion (£1.2 billion) profit. On Friday, Citigroup is forecast to unveil an $11 billion (£5.5 billion) hit from the credit crunch.

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