The writedowns were significantly above the $4.5 billion that it disclosed at the time of its earnings pre-release and followed Merrill Lynch’s report that its net loss of continuing operations in Q3 totalled $2.3 billion.
The significant profit warnings for Merrill Lynch echoed those reported by institutions as UBS and Credit Suisse.
Stan O’Neal, chairman and chief executive officer at Merrill Lynch, said: “In light of difficult credit markets and additional analysis by management during our quarter-end closing process, we re-examined our remaining CDO positions with more conservative assumptions. The result is a larger write-down of these assets than initially anticipated. We expect market conditions for non-conforming mortgage-related assets to continue to be uncertain and we are working to resolve the remaining impact from our positions.”
Alan Lakey, partner at Highclere Financial Services, said: “The question is whether we have passed the peak of the problems and it appears not. Having such negative results will naturally result in Merrill Lynch’s share price going down. The markets are already jittery and if America goes into recession it could drag us with it. There are other problems on the horizon.”
“People like Merrill Lynch can afford a loss, but smaller companies can’t afford to sustain losses and so take pre-emptive action. The real question mark is at what point will this stop.”
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