Merrill reels from $7.9B write-down

The worse-than-expected third-quarter losses raise questions as to the fate of chief executive Stanley O’Neal.
OCT 24, 2007
Losses on subprime mortgages and collateralized debt obligations have taken a larger-than-expected chunk from Merrill Lynch & Co. Inc.’s third quarter earnings. The New York-based firm said that it had a third-quarter net loss of $2.24 billion, or $2.82 per diluted share. That’s down from $3.04 billion, or $3.17, last year. Declines in the firm’s fixed income, currencies and commodities business lopped billions from third-quarter earnings: A $7.9 billion write-down was attributed to collateralized debt obligations and subprime mortgages. The numbers are even more dire than Merrill Lynch’s glum predictions back on Oct. 5, when the firm said it would have a net loss of 50 cents per diluted share and $4.5 billion in write-downs from the sinking fixed-income securities. Merrill Lynch’s losses raise questions as to the fate of chief executive Stanley O’Neal. Confidence in the Mr. O’Neal is “certainly shaken,” an analyst at RCM Capital Management in San Francisco told Bloomberg. Mr. O’Neal has stepped up to face the losses, admitting that he had steered the company into the storm, according to Reuters. “We got it wrong by being overexposed to subprime,” he said on a conference call. “I am accountable for the performance of the firm overall, and my job, our job, the leadership team’s job, is to address where we went wrong,” he added.

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