Investment bank Merrill Lynch and amp; Co. said Thursday its third-quarter loss widened as it took more than $12 billion in charges and write-downs tied to the sale of mortgage investments and fallout from the continued credit crisis. Merrill, which agreed last month to sell itself to Bank of America Corp., lost $5.2 billion, or $5.58 per share, compared with a loss of $2.2 billion, or $2.82 per share, a year earlier. Analysts polled by Thomson Reuters, on average, forecast a loss of $5.22 per share. Merrill recorded $3.8 billion in write-downs and losses as the credit crisis worsened in September. The charges were tied to investments in government-sponsored entities and other investment banks, which were either taken over by the government or failed during the month. Merrill did not disclose what types of investments and exposure it had that led to the losses. “Our results were particularly impacted by the month of September, which represented one of the worst months in the history of the credit markets,” Nelson Chai, Merrill's chief financial officer, said during a conference call discussing quarterly results. As concerns about the stability of financial firms mounted in September, investment bank Lehman Brothers Holdings Inc. filed for bankruptcy protection. Investors became worried that the stand-alone investment bank model was no longer viable and the banks would succumb to liquidity pressures, as banks became nervous about lending to each other amid concerns of more potential failures. Merrill said it had about $77 billion in its excess liquidity pool at the end of September, more than enough to cover all debt maturing over the next year. As Lehman fell apart, Merrill agreed to the deal with Bank of America, which came just days before the government bailed out insurance giant American International Group Inc. with an $85 billion loan. The all-stock transaction was initially worth about $50 billion. Based on Bank of America's closing price Tuesday of $23.82 and the number of shares Merrill had outstanding at the end of September, the deal is currently valued at about $32.76 billion. After the financial fallout in September, the US government approved a plan to invest up to $250 billion in financial services firms to provide additional capital support. Merrill Lynch said it will participate in the program, and expects to issue $10 billion in preferred stock and warrants to the US Treasury Department. The government plan, which includes additional lending programs for banks, should help improve liquidity in the credit markets, Merrill's chief executive, John Thain, said during the conference call.
