Merrill Reports $4.7B Mortgage-Related Loss

Merrill Lynch has reported a $4.7 billion net loss in the second quarter and saw more than $9 billion in writedowns and losses that were partly mortgage-related, but says it is making progress in reducing its problem assets and bolstering its liquidity. Writedowns and losses during the quarter included $3.5 billion related to U.S. super-senior asset-backed security collateralized debt obligations, as well as credit valuation adjustments of negative $2.9 billion related to hedges with financial guarantors, about half of which were linked to U.S. super-senior ABS CDOs. Other losses and writedowns included $1.3 billion from "certain residential mortgage exposures" and $1.7 billion from the investment portfolio of Merrill's U.S. banks. "Our core franchise continues to perform well despite the extremely challenging market environment," said John A. Thain, chairman and chief executive officer. "Against this backdrop, we increased our excess liquidity pool to a record level of $92 billion and significantly reduced our exposures in key asset classes." Merrill can be found online at http://www.ml.com.