Merrill Takes $4.5B in Subprime Hits

Merrill Lynch -- once the largest Wall Street player in the subprime market -- took $4.5 billion in mortgage-related writedowns in the first quarter and revealed that it has additional asset-backed security exposure of $6.7 billion. The figures were released along with Merrill's announcement that it lost $1.97 billion in the first quarter, compared with a $2 billion profit a year earlier. The $4.5 billion in subprime charges includes a $1.5 billion writedown on ABS-related collateralized debt obligations and $3 billion in charges that Merrill says are "related to hedges with financial guarantors." At the end of the fourth quarter, Merrill said it had subprime ABS exposure of $5.1 billion. In early March the investment banking firm closed its subprime origination unit, First Franklin Financial Corp. of San Jose, Calif., and placed its servicing operation on the auction block. A little more than a year ago Merrill paid $1.3 billion for the units. The seller was National City Corp. of Cleveland.