Merrill Lynch Match Sub-Prime Losses

Investment banking firm Merrill Lynch has today announced a significant downturn in profit figures over the third quarter as a result of market volatility particularly in the US sub-prime sector, seeing it heading in a similar direction to many other global investment banks.

The figures released today for the period reflected a downturn of just under $8 billion, its first reported loss in over six years as a reflection of the significance of the sub-prime fallout of the summer months, which has seen it and other banks lose out as a result of increasing defaults and liquidity problems.

The results see a swing from significant profits over the last period, which the company has largely put down to its exposure to sub-prime bad debts and the unrest in that market over the last few months.

Analysts have put much of the losses down to poor risk management at Merrill Lynch, an allegation the company is likely to be keen to refute in light of its core business operations, which involve advising corporate clients on buy outs and market acquisitions.

Its investment business has been particularly profitable over the last few years, as a result of widespread diversified portfolios exploiting high risk, high yield investments, including most recently the infamous sub-prime mortgage market in the US.

Merrill is not alone in its losses, following many other main brand investment banks in reporting losses over the period, including Citi which reported losses of around $3 billion, resulting in management restructure and pressures on executive Chuck Prince to leave his post within the world’s largest commercial entity.

It remains to be seen whether Merrill will approach their results in a similar manner, and indeed whether any pending internal investigations will follow on to a staff reshuffle at a senior level.

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