More Losses, Job Cuts Reported at Merrill Lynch
The world's largest brokerage, Merrill Lynch, reported today a nearly $2 billion first-quarter loss and stated its plans to cut 4,000 jobs after suffering several billion dollars of write-downs for subprime mortgages and other risky assets.
The job cuts represent roughly 10 percent of Merrill Lynch's staff, excluding financial advisers and investment associates. The job cuts will be targeted in markets and investment banking operations and in support areas.
The company said it ended March with 63,100 employees overall.
According to Chief Executive John Thain, despite the company's loss, it remains "well-capitalized.''
Moody's Investor Service, however, said it may cut its long-term A1 rating on investment bank Merrill Lynch in light of these additional losses and deteriorating conditions in the mortgage market.
"The review is in response to continued deteriorating conditions in the mortgage market and the increased expected losses on MER's portfolio of super-senior CDO's and related guarantor hedges as measured in Moody's stress tests," Moody's said in a press release.
Merrill Lynch had already recorded more than $24 billion of writedowns in prior quarters. These spurred it to raise more than $12 billion of new capital. Thain said this month he did not expect to raise more capital in the foreseeable future.
Markdowns on those positions and additions to counterparty credit reserves were a major contributor to the first quarter loss, the rating agency said. Moody's had previously expected Merrill Lynch to be profitable throughout 2008. The rating agency forecast potential further markdowns of approximately $6 billion beyond the charges recognized by Merrill Lynch in the past three quarters.
Published on April 17, 2008
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