NEW YORK - US investment bank Merrill Lynch reported its third straight quarter in the red on Thursday after another massive write-down on assets from its adventure in the risky US subprime mortgage market.

The Wall Street giant said it recorded a net loss of US$1.96 billion (S$2.64 billion) for the first quarter of 2008, compared with a net profit of US$2.16 billion a year ago, and announced it would slash 10 percent of its workforce.

Earnings per share were US$2.19, sharply higher than analysts' consensus forecast of US$1.99.

Revenue for the quarter ending on March 28 fell to US$2.93 billion from last year's US$9.6 billion as Merrill wrote down US$9 billion in assets.

The bank wrote down some US$6.6 billion in soured investments related to the US mortgage market and three billion dollars on assets tied to municipal bond insurers.

'Despite this quarter's loss, Merrill Lynch's underlying businesses produced solid results in a difficult market environment,' Mr John Thain, chairman and chief executive, said in a statement.

'The firm's 82-billion-dollar excess liquidity pool has increased from year-end levels, and we remain well-capitalised,' he said.

Merrill is the US bank the hardest hit by a credit squeeze that erupted in August amid rising defaults on US subprime mortgages as a housing boom collapsed. Worldwide, Merrill is the second most impacted bank, after Swiss giant UBS.

Merrill reported a 2007 annual loss of US$7.8 billion on writedowns of US$11.5 billion.

Most of the rout in Merrill's accounts for the past three quarters came from exposure to the meltdown in the high-risk subprime home-loan sector, where credit was given to customers with weak credit histories.

In contrast to Merrill's first-quarter losses, Wall Street peers Goldman Sachs, JPMorgan Chase, Lehman Brothers and Morgan Stanley announced profits, although on average they were halved.

Even Bear Stearns, which nearly collapsed in early March from the credit crunch and was rescued in a government-funded takeover by JPMorgan, squeaked out a profit of US$115 million.

To buffer its pain, Merrill announced on Thursday it would lop off 4,000 employees, or 10 per cent of its workforce, from year-end 2007 levels.

Most of the job losses would come in the investment banking division and support services. Merrill said it had already shrunk its workforce by some 1,000 jobs in the first quarter, particularly in its Franklin mortgage lending business.

The bank plans to record a US$350 million charge in the second quarter related to the job cuts, which were expected to generate cost savings of US$800 million on an annualised basis.

Moody's Investors Services said it was considering downgrading Merrill's long-term credit ratings, citing continued deteriorating conditions in the mortgage market and 'increased expected losses' on Merrill's portfolio.

'This was about as difficult a quarter as I've seen in my 30 years on Wall Street,' Mr Thain said in a conference call.

'We are planning for a slower and more difficult next couple of months and probably next couple of quarters, but are also hopeful for our full year 2008 results.'

Shares in Merrill Lynch jumped 4.05 per cent to close at US$46.71. -- AFP

Is this article useful to you?