NEW YORK – MERRILL Lynch said on Wednesday that its total exposure to risky collateralised debt obligations (CDOs) and sub-prime mortgages is US$27.2 billion (S$39.3 billion) – about US$6.3 billion (S$9.1 billion) more than the sum disclosed late last month.
The larger figure comes about mostly because of a deeper level of disclosure surrounding its banking operations.
For the first time, the world’s largest brokerage disclosed US$5.7 billion worth of exposure to sub-prime mortgages in the United States at Merrill Lynch Bank USA, a Utah-chartered industrial bank, and Merrill Lynch Bank & Trust, a full-service thrift institution.
Those operations file disclosures and financial statements with US banking regulators, which have not required details on sub-prime exposure.
In addition, Merrill said its exposure to CDOs is now US$15.82 billion, or about US$600 million more than what it had revealed in its third-quarter earnings release on Oct 24.
The figure is larger because a hedge against potential loss was terminated recently after a dispute with a counterparty, which Merrill declined to name.
CDOs and sub-prime mortgages were largely responsible for Merrill’s US$2.3 billion loss in the third quarter, the largest in the company’s history. An US$8.4 billion write-down, mostly related to sub-prime mortgages and CDOs, triggered the loss.
Analysts fear Merrill and other Wall Street banks will have to record further write-downs on their exposure because the market for CDOs and sub-prime mortgages remains in turmoil.
Source: REUTERS (The Straits Times 9 Nov 07)
