Merrill Lynch Announces Year End Loss

by Stewart Douglas

Story link: Merrill Lynch Announces Year End Loss

US investment bank Merrill Lynch has today announced a staggering loss for the year end 2007 as a result of its exposure to the US sub-prime sector, which now ranks it as the most significant loser of the collapse with some $22 billion worth of devalued assets on its books and a now substantial loss for the year to contend with.

The top-flight investment firm was today publicly embarrassed with the revelation that it had realised almost an $8 billion loss over the year, almost exclusively down to the writedowns it was forced to take to acknowledge the changing value of its assets held in connection with the now-failed sub-prime sector.

Announced alongside the loss today was a further writedown in excess of $14 billion in the latest round of asset revaluation at the firm, which has experienced some degree of difficulty in finding its feet following the high profile collapse of the sub-prime mortgage sector.

The sub-prime sector which loaned money to those with poorer credit histories was seen for a number of years as a profitable area for investment, leading to heavy exposure by institutions across the world. 

However with rising interest rates and underlying housing problems in the US market, the sector quickly came under pressure with rising defaults and foreclosures reducing liquidity and causing problems for equity firms and investment banks.

The news comes following similar sentiments from JP Morgan and Citigroup, who both also reported poorer than usual results for the year end following their own individual exposures to the sub-prime sector.

Commenting on the results today, new chief executive John Thain was quick to brand the results as unacceptable, suggesting that the bank would see an improved performance over the course of the next twelve months regardless of ongoing unrest in the market.