Early last year, I came close to accepting a job at Merrill Lynch. It was quite tempting, not only because Merrill Lynch was a brand name organisation then, but also because the job was in a rapidly growing sector - commodities.
More pain for Merrill Lynch
Wall Street firm's quarterly loss is even wider than expected after billion in writedowns, and it plans to cut 4,000 jobs.
By Tami Luhby
April 17, 2008: 7:04 AM EDT
NEW YORK (CNNMoney.com) -- The pain isn't over for Merrill Lynch & Co.
The investment bank Thursday missed even the drastically lowered estimates for its first-quarter results, reporting a net loss of $1.96 billion, or $2.19 per diluted share.
The company also plans to cut about 4,000 jobs, or about 10% of its workforce, excluding financial advisers and investment associates. It will focus the reductions in its global markets and investment banking division.
Net revenue was $2.9 billion, down 69% from the prior-year period, primarily due to net writedowns totaling $1.5 billion related to asset-backed securities and a downward adjustment of $3 billion related to hedges with financial guarantors.
"Despite this quarter's loss, Merrill Lynch's underlying businesses produced solid results in a difficult market environment," said John A. Thain, chief executive officer, who said the bank remained well-capitalized.
Analysts had projected a $1.99 per share loss on a net loss of $1.4 billion and revenue of $3.7 billion.
Wall Street was prepared for horrendous earnings from Merrill Lynch (MER, Fortune 500). Analysts were almost tripping over themselves to cut profit estimates and enlarge writedowns, suspecting the value of the company's assets had fallen steeply in recent months. Only a month ago, analysts were predicting profit of 48 cents per share. At the start of 2008, the consensus estimate was $1.52 per share.
"Unfortunately, Merrill has significant balance sheet exposures in many of the asset classes that experienced continued pricing pressure in [the first quarter]," wrote Jeff Harte in an April 2 note.
.... Merrill Lynch raised $12.8 billion in capital during the past two quarters and Chief Executive John Thain has said he doesn't plan to raise any more.
The commodities space is still hot - in fact, it's arguably the only thing that's still hot in the financial world. It's not just the usual oil, gas and gold stories - now, even plain old rice has become a hot commodity.
Merrill Lynch is, however, no longer a brand name. Instead, among all the investment banks in the world, it's probably the one that was hardest-hit in the US subprime crisis. Merrill Lynch will take a long time to recover from this mess, if it ever does.
Oh well. Just as well I didn't join Merrill.
It's barely been 4 months since Temasek started buying into Merrill Lynch, and Temasek is already sitting on paper losses of more than half a billion USD dollars. Citizens, are you worried for Singapore yet?