Merrill posts $2.3 billion loss : US Business

NEW YORK (Reuters) - Merrill Lynch & Co Inc on Wednesday reported $7.9 billion in write-downs for the third-quarter as shaky risk management and bad bets on mortgages and leveraged loans for corporate takeovers triggered the company's first loss in six years.

"This is a bloodbath for certain. It speaks very poorly to Merrill's risk management practices," said Bill Fitzpatrick, an analyst at JohnsonFamily Funds in Racine, Wisconsin, which invests $1.8 billion but does not own Merrill shares.

"Clearly, heads are going to roll, and I wouldn't be surprised to see meaningful near-term layoffs," He said.

The world's largest brokerage reported a net loss of $2.3 billion, or $2.85 a share, from continuing operations, compared with profit of $3 billion, or $3.14 a share, in the year-ago period.

The $7.9 billion write-down was more than the $5.5 billion Merrill forecast earlier this month. After re-examining its positions on collateralized debt obligations, Merrill Lynch used more conservative assumptions for valuing those assets.

Merrill Lynch Chairman and Chief Executive Stan O'Neal cited continued uncertainty in the market for risky subprime mortgages.

"We are working to resolve the remaining impact from our positions," O'Neal said in a statement.

Merrill shares are down 28 percent this year, and fell before results were released as investors anticipated the bigger-than-expected write-downs after reading news reports.

(Reporting by Tim McLaughlin)

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