Merrill Lynch posts big loss

By Dan Wilchins

NEW YORK (Reuters) - Merrill Lynch & Co (MER.N: Quote, Profile, Research) on Thursday posted a quarterly loss of $2 billion and said it planned to cut 4,000 jobs after recording more than $9.5 billion in write-downs and losses on subprime mortgages and other risky assets.

The results were worse than analysts' gloomy expectations, and shares of the world's largest brokerage fell more than 2 percent in premarket trading.

Chief Executive John Thain is trying to turn the company around as it struggles with the aftermath of bad bets on subprime mortgages and repackaged debt. He is increasing the investment bank's business in emerging markets and cutting costs to help offset write-downs.

Merrill Lynch reported losses, write-downs and reserve increases of $1.5 billion on collateralized debt obligations, $925 million on loans financing leveraged buyouts, $3.5 billion on an investment portfolio, more than $800 million on residential mortgages, and $3 billion for exposure to bond insurers.

The job cuts cover about 10 percent of Merrill Lynch staff, excluding financial advisers and investment associates. The company, which ended March with 63,100 employees overall, said it would target the job cuts to its markets and investment banking operations and in support areas.

Merrill Lynch's first-quarter net loss was $1.96 billion, compared with a year-earlier profit of $2.16 billion.

Including preferred stock dividends, the loss was $2.14 billion, or $2.19 per share, and compared with a profit of $2.11 billion, or $2.26 a share, a year earlier.

The loss from continuing operations was $2.20 per share, wider than the analysts' average forecast of $1.96, according to Reuters Estimates.

Net revenue declined 69 percent to $2.93 billion. Analysts expected $3.35 billion.

Thain said that despite the loss, Merrill Lynch remained "well-capitalized."

The company had already recorded more than $24 billion of write-downs in prior quarters, spurring it to raise more than $12 billion of new capital. Thain said this month that he did not expect to raise more capital in the foreseeable future.

A $2.1 billion benefit from widening credit spreads partly offset the write-downs and losses on risky assets.

Merrill Lynch shares were down 2.2 percent at $43.91 in trading before the market opened.

At Wednesday's close, Merrill Lynch's shares had fallen 16.4 percent year to date, compared with a roughly 25 percent decline in the Amex securities broker-dealer index .XBD.

(Additional reporting by Christopher Kaufman and Jonathan Stempel; Editing by Derek Caney, Steve Orlofsky and Lisa Von Ahn)

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