After being hard hit by the credit crisis, Merrill Lynch today reports a fourth quarter net loss of nearly $10 billion.
The company’s year-end results posted full year net loss of of $8.6 billion. The company says its substantially reduced performance in 2007 was primarily driven by significant declines in Fixed Income, Currencies & Commodities (FICC) net revenues for the second half of the year, which more than offset record full-year net revenues in equity markets, investment banking and global private client (GPC), and record first-half net revenues from FICC.
During the second half of 2007, FICC net revenues were materially impacted by a weaker business environment and net write-downs that included $7.9 billion in the third quarter and $11.5 billion in the fourth quarter related to U.S. ABS CDOs and U.S. subprime residential mortgages outside of the firm’s U.S. bank-related investment securities portfolio. In addition, credit valuation adjustments of $2.6 billion related to hedges with financial guarantors on U.S. ABS CDOs were recorded in the fourth quarter of 2007.
For the fourth quarter of 2007, net revenues were negative $8.2 billion, down from $8.4 billion in the prior-year period, and Merrill Lynch’s fourth-quarter 2007 pretax loss from continuing operations was $14.9 billion. Merrill Lynch’s net loss for the fourth quarter of 2007 was $9.8 billion, or $12.01 per diluted share, significantly below net earnings of $2.3 billion, or $2.41 per diluted share for the 2006 fourth quarter.
“While the firm’s earnings performance for the year is clearly unacceptable, over the last few weeks we have substantially strengthened the firm’s liquidity and balance sheet,” says John A. Thain, chairman and chief executive officer. “In addition, a great majority of Merrill Lynch’s key businesses delivered record results in 2007, and as I look ahead to 2008, the firm is intensely focused on continuing this momentum and delivering growth and increased profitability for our shareholders and employees.”
Merrill Lynch’s announcement comes after a similar announcement earlier this week from Citi, who reported fourth-quarter losses of nearly $10 billion as well. Both have been scrambling to find capital to bail them out.