Merrill posts loss, plans to cut 4,000 jobs

NEW YORK - Merrill Lynch & Co., the world’s largest brokerage, on Thursday said it would cut 4,000 jobs after more than $6 billion fresh write-downs pushed it to a loss for the first quarter.

Chief Executive John Thain also cautioned that things were unlikely to improve much in the next couple of quarters.

The write-downs caused Merrill Lynch to lose $2.14 billion, or $2.19 per share, after paying preferred dividends, compared to a profit of $2.11 billion, or $2.26 per share, a year earlier.
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The New York-based firm posted negative revenue in its fixed-income trading business and a 40 percent slump in investment banking fees. This caused total revenue to slip 69 percent to $2.93 billion from $9.6 billion a year earlier.

Results missed Wall Street projections for a loss of $1.99 per share on $3.7 billion of revenue, according to analysts polled by Thomson Financial.

Merrill Lynch, the third-largest U.S. securities firm by market value, has been slammed by the global credit crisis that roiled markets since last summer. Risky bets in mortgage-backed securities have led to nearly $200 billion of write-downs — with Merrill Lynch contributing at least $24 billion to that amount.

Despite the turbulence, Thain said the company has $82 billion of excess liquidity to help protect against choppy market conditions.

“This was about as difficult a quarter as I’ve seen in my 30 years on Wall Street,” Thain told analysts during a conference call. “We are planning for a slower and more difficult next couple of months and probably next couple of quarters, but are also hopeful for our full year 2008 results.”

After joining Merrill four months ago, Thain pledged to clean up the brokerage’s balance sheet and take steps to make it more profitable. He already secured more than $12 billion worth of new capital, and now has unveiled a plan to trim the company’s ranks.

Merrill said it will record a restructuring charge of $350 million in the current quarter for the layoffs, which will reduce its headcount by 10 percent in areas outside of financial advisers and investment associates. The entire company has about 63,000 employees globally.

During the first quarter, Merrill Lynch said it suffered a $1.5 billion write-down linked to asset-backed securities, and a $3 billion write-down tied to the value of bond insurance contracts. The brokerage also lowered the value of leveraged loans by $925 million.

It reported that fixed-income trading revenue was $3.38 billion because of the tightening credit markets. Equity-trading revenue was $1.88 billion, down from $2.39 billion a year earlier.

Meanwhile, debt underwriting fell to $231 million from $586 million last year. Stock underwriting revenue fell to $199 million from $363 million a year ago.
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