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NEW YORK - MERRILL Lynch's credibility and stock took a big hit after reports said the biggest brokerage sought to delay billions of dollars of losses on troubled assets by moving them to hedge funds. Renewed worries about United States banks' exposure to subprime mortgage-related assets punished financial stocks across the board on Friday. Merrill, which does not have a chief executive after the departure of Mr Stan O'Neal earlier this week, led the declines, which knocked about US$4.3 billion (S$6.2 billion) off its market capitalisation. Merrill had its biggest drop in 18 years, falling as much as 12 per cent on Friday morning, before the company said that it was not aware of any inappropriate transactions. Merrill's stock closed down 7.9 per cent, or US$4.91, to US$57.28. It shares have lost 38.5 per cent so far this year, shaving more than US$35 billion off its market cap. 'We have increasingly lost confidence in the financials of Merrill, especially after the sudden increase in (collateralised debt obligation) write-downs,' Deutsche Bank analyst Mike Mayo said in a note issued on Friday. He cut his rating on Merrill shares to 'buy' and said the company might need to find a partner to restore credibility and financial strength. In the fourth quarter alone, large US banks and brokerages could suffer additional write-downs of more than US$10 billion as deteriorating credit trends continue to undercut the value of subprime mortgages and related securities, Mr Mayo said. The spreads, or the yield premium over US Treasuries investors demand to hold Merrill bonds, widened on Friday. Merrill credit is now trading as low as junk. -- REUTERS
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