Merrill shakes off $9.8B loss
NEW YORK -- New Merrill Lynch CEO John Thain is moving fast to make sure his company never again has a quarter like 2007's last three months.
He pointed out that Merrill has raised more than $12.5 billion from sovereign wealth funds in recent weeks, and expressed confidence that the worst of the subprime-related losses was over.
"We raised the capital that we need to go forward," he said in a phone interview. "We maintained our (credit) ratings, and now we're looking to the future of the enterprise, the earnings power of enterprise, and not to dealing with this anymore."
And like Citigroup, Merrill's stock took a beating after the announcement, dropping 10% to close at $49.45 Thursday.
Over the past year, Merrill Lynch stock has dropped about 50% from its high. The brokerage firm's fourth-quarter loss produced a full-year loss of $8.6 billion, the first time in decades that Merrill finished a year in the red. Merrill recorded close to $17 billion in special charges, one-time markdowns of assets on its balance sheet. The bulk of those charges, $11.5 billion, stemmed from subprime mortgage investments gone sour, and another $3.1 billion on subprime hedging activities that backfired.
Obscured by the losses were strong performances in some of Merrill Lynch's core businesses. For the full year, revenue in equity markets and investment banking broke the previous year's records, and pretax profit in global wealth management jumped 41%.
Noting that Merrill Lynch stumbled into its subprime problems because of poor risk-management programs and trading practices that weren't well supervised, Thain said the new heads of risk management and trading would report directly to him.
