Merrill Lynch loses $9.8B in 4th quarter

NEW YORK — Merrill Lynch on Thursday became the second large Wall Street firm in three days to report a nearly $10 billion fourth-quarter net loss caused by the subprime mortgage downturn.

The brokerage reported a loss of $9.8 billion, or $12.01 a share, compared with a profit of $2.3 billion, or $2.41 a share, a year earlier.

The deficit resulted from a $16.7 billion write-down of the value of assets on Merrill's books, primarily mortgage-related securities. It followed a similar $7.9 billion write-down taken by the securities giant in the third quarter.

Merrill's net loss was nearly identical in size to a $9.8 billion loss that Citigroup reported Tuesday and was much larger than analysts had expected. Merrill's stock sank $5.64, or 10 percent, to $49.45.

"While the firm's earnings performance for the year is clearly unacceptable, over the last few weeks we have substantially strengthened the firm's liquidity and balance sheet," said John Thain, Merrill's new chief executive.

The latest write-down included $3.1 billion taken to reflect the possibility that a bond insurer might not be able to pay off on insurancelike hedges Merrill had entered into to reduce its exposure to subprime risk. Merrill said it took the action because the credit rating of the insurer, ACA Capital, had been slashed to junk levels.