Merrill Lynch shocked the market last night when it moved to raise $8.5bn (£4.3bn) through a public share offering to shore up its balance sheet, sold $11.1bn of toxic mortgage securities and took a fresh $5.7bn write-down.
The move came only days after the Wall Street bank unveiled a $4.6bn second-quarter loss and write-downs of $9.4bn related to sub-prime mortgages and risky debts. The latest write-down brings Merrill's total to $46bn, making it one of the biggest casualties of the credit crunch so far, along with rivals Citi and UBS.
Total write-downs announced by major banks around the world since the start of the crisis a year ago have hit $274bn, and some estimates suggest the figure could reach $1 trillion.
Deutsche Bank analyst Mike Mayo said Citi could post another $8bn write-downs from its CDO exposure, based on Merrill's figures.
Merrill's announcement came after Wall Street closed yesterday. Shares in Merrill had ended the day down 11.6% at $24.33, suggesting some traders knew what was coming. The shares rose 34 cents to $24.67 in early trading today, a rise of 1.4%.
Nomura, Japan's largest brokerage, added to the gloom this morning as it posted a surprise ¥76.6bn (£355m) loss for the three months to end June, compared with a profit of ¥75.9bn a year ago. Revenues crashed 60% to ¥257.9bn because of a slump in trading and new stock offerings. Source