Merrill Lynch & Co said on Friday it would post a third-quarter loss after writing down $4.5 billion in collateralized debt obligations and subprime mortgage holdings.
Merrill, which now expects to report a net loss of up to 50 cents a share, also cited leverage finance commitments as a reason for the shortfall.
Merrill had been expected to earn $1.43 a share in the third quarter, according to Reuters Estimates.
The world's biggest brokerage firm said the writedowns primarily affected its Fixed Income, Currencies and Commodities (FICC) business.
Merrill said in a statement it expects to report revenue growth in excess of 20 percent over the 2006 third quarter in each of its other business lines and solid revenue performance from the rest of its FICC businesses.
(Reporting by Ed Leefeldt)