US investment bank Merrill Lynch has revealed that in the third quarter it had to write down 5.5 billion euros due to bad investments on subprime mortgages and loans for corporate takeovers. The write downs were bigger than the combined total all of its major Wall Street rivals Goldman Sachs, Bear Stearns, Morgan Stanley and Lehman Brothers. None of the other posted a third-quarter loss.
The figures were called “pretty spectacular” and “a bloodbath” by analysts who criticised the firm’s risk management practices in its fixed-income portfolio and predicted that more heads will roll on top of the three managers who have already left. The net loss for the world’s largest brokerage firm for the quarter was 1.6 billion euros. That was not as terrible as some analysts had feared, but has not ended investors worries about the impact of the credit crisis on bank earnings.