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Merrill Lynch posts $7.8bn loss Merrill Lynch posts $7.8bn loss
(31 minutes later)
Wall Street banking giant Merrill Lynch has reported a net loss for 2007 after getting caught up in problems stemming from a slump in the US housing market. Wall Street banking giant Merrill Lynch has reported a loss for 2007 after getting caught up in problems stemming from a slump in the US housing market.
The company said it had made a net loss of $7.8bn (£3.9bn) in the 12 months to the end of December.The company said it had made a net loss of $7.8bn (£3.9bn) in the 12 months to the end of December.
It is the latest US and European bank to reveal losses related to investments linked to the US mortgage market.It is the latest US and European bank to reveal losses related to investments linked to the US mortgage market.
Included in those results is a massive $14.1bn write-down on investments related to subprime mortgages. Included in those results is a massive $14.1bn write-down on investments related to sub-prime mortgages.
MAIN SUB-PRIME LOSSES SO FAR Merrill Lynch: $22.1bnCitigroup: $18bn UBS: $13.5bn Morgan Stanley $9.4bn HSBC: $3.4bnBear Stearns: $3.2bn Deutsche Bank: $3.2bn Bank of America: $3bnBarclays: $2.6bn Royal Bank of Scotland: $2.6bn Freddie Mac: $2bnJP Morgan Chase: $1.3bn Credit Suisse: $1bn Wachovia: $1.1bn IKB: $2.6bn Paribas: $439mSource: Company reports class="" href="/1/hi/business/7096845.stm">Timeline: How the sub-prime crisis unfolded It is a shock to the system, they are trying to get as much transparency as possible about their sub-prime exposure Mark DurlingBrewin Dolphin Securities
It is the company's second quarterly loss in a row.It is the company's second quarterly loss in a row.
The previous chief executive, Stan O'Neal, stepped down in October because of the bank's poor performance.The previous chief executive, Stan O'Neal, stepped down in October because of the bank's poor performance.
New boss John Thain said: "While the firm's performance for the year is clearly unacceptable, over the last few weeks we have substantially strengthened the firm's liquidity and balance sheet."New boss John Thain said: "While the firm's performance for the year is clearly unacceptable, over the last few weeks we have substantially strengthened the firm's liquidity and balance sheet."
Widespread woes
Earlier this week, Citigroup and JP Morgan also announced write-downs because of their exposure to the sub-prime loan sector.Earlier this week, Citigroup and JP Morgan also announced write-downs because of their exposure to the sub-prime loan sector.
JP Morgan Chase said its earnings for the last three months of 2007 fell 34%. Net income was $2.97bn (£1.5bn) in the quarter to the end of December, down from $4.53bn a year earlier.JP Morgan Chase said its earnings for the last three months of 2007 fell 34%. Net income was $2.97bn (£1.5bn) in the quarter to the end of December, down from $4.53bn a year earlier.
MAIN SUB-PRIME LOSSES SO FAR Merrill Lynch: $22.1bnCitigroup: $18bn UBS: $13.5bn Morgan Stanley $9.4bn HSBC: $3.4bnBear Stearns: $3.2bn Deutsche Bank: $3.2bn Bank of America: $3bnBarclays: $2.6bn Royal Bank of Scotland: $2.6bn Freddie Mac: $2bnJP Morgan Chase: $1.3bn Credit Suisse: $1bn Wachovia: $1.1bn IKB: $2.6bn Paribas: $439mSource: Company reports Timeline: How the sub-prime crisis unfolded
On Tuesday, Citigroup reported a $9.83bn net loss for the last three months of 2007 after having to cut the value of its investments by $18.1bn.On Tuesday, Citigroup reported a $9.83bn net loss for the last three months of 2007 after having to cut the value of its investments by $18.1bn.
Banks are struggling to calculate how much their investments in assets backed by sub-prime mortgages are actually worth, which is why they are reporting massive write-downs.
Analyst Mark Durling at Brewin Dolphin Securities said about Merrill Lynch's results: "It is a shock to the system, they are trying to get as much transparency as possible about their subprime exposure.
"They're being ultra-conservative here."
The sub-prime market is focused on providing loans to those with limited or poor credit histories.
During the US housing boom, this market expanded significantly. But a series of interest rate rises over two years meant many sub-prime borrowers could no longer afford their monthly payments, causing them to default on loans.