Merrill Lynch posts 2Q loss; sells Bloomberg stake

The world's biggest brokerage announced a wider-than-expected $4.89 billion second-quarter loss and said it was selling assets--its stake in media company Bloomberg LP for $4.4 billion and its Financial Data Services Inc. subsidiary for $3.5 billion.

After Wells Fargo & Co. and JPMorgan Chase & Co. announced stronger-than-expected earnings this week, Merrill's results served as a reminder that the credit crisis isn't fading. Global banks and brokerages have been forced to take some $300 billion of write-downs in the past year, an amount that some believe could grow to $1 trillion before the turmoil has passed.

"This was a difficult and disappointing quarter in terms of the bottom line," Chief Executive John Thain told analysts on a conference call. "But, in spite of this loss, we likely have in our last two quarters more than replaced the capital that we lost."

Merrill's quarterly loss came to $4.97 per share, after accounting for the payment of dividends for the three months ended June 30. That compares to a year-ago profit of $2.01 billion, or $2.24 per share. The broker reported negative revenue of $2.11 billion versus revenue of $9.46 billion a year earlier.

Analysts had expected that the New York-based brokerage would lose $1.91 per share, according to Thomson Financial.

Merrill, which had already taken $29 billion of write-downs, racked up a sizable amount in the latest quarter. The brokerage took $9.4 billion of charges and write-downs from mortgage-backed securities, unprofitable hedge positions, and residential mortgage exposure.

The company reported $3.5 billion of losses from its exposure to collateralized debt obligations, which are financial instruments tied to mortgages. In addition, it lost $2.9 billion from wrong-way hedges it bought from bond insurers.

It also took another $1.7 billion in losses from its investment portfolio of its U.S. banks, and $1.3 billion in write-downs from exposure to residential mortgages.

Though the firm's core business held up better than expected, revenue from banking, trading and wealth management fell 21 percent from a year earlier. The company also said it cut its risk exposure across all of its businesses, and that its capital base now stands at $92 billion.