Worst loss ever for Merrill Lynch

Washington Mutual, the largest US savings and loan, had a nearly $3 billion reversal of fortune in the fourth quarter from the year-ago period, recording a loss of $1.87 billion. (Elaine Thompson/Associated Press)

Merrill Lynch & Co. recorded its biggest quarterly loss since being founded 94 years ago after the world's largest brokerage took almost $15 billion worth of write-downs from bad subprime mortgage bets.

That caused a fourth-quarter net loss after preferred dividends of $9.91 billion, or $12.01 per share, compared to a profit of $2.3 billion, or $2.41 per share, a year earlier. Analysts - who have had a hard time ascertaining just how steep losses would be for Wall Street banks - had been forecasting a $4.93 per share loss, according to Thomson Financial.

Merrill's massive write-offs came largely from the shrinking value of securities backed by mortgages, which have soured as borrowers are unable to repay them on time.

John Thain, the new chief executive, said he believes this will be the bulk of the write-downs from its subprime mortgage exposure. But he would not speculate about what 2008 might hold in store in other areas.

The New York brokerage marked down $11.5 billion from mortgage-backed securities, and an additional $3.1 billion in adjustments to hedge positions on them. (AP)

Washington Mutual Inc., the biggest US savings and loan, said it swung to a $1.87 billion loss in the fourth quarter, hurt badly by the sinking value of its mortgage portfolio.

The quarterly loss was $2.19 per share, compared with a profit of $1.06 billion, or $1.10 per share in the year-ago period.

Results included a write-down of $1.6 billion, which was previously disclosed.

Revenue, including net interest income, or what was made on loans minus what was paid out on deposits, and noninterest income, or the cash made from mortgage loan service fees and other fees and charges, totaled $3.41 billion, lower than Wall Street's expectation of $3.51 billion.

WaMu also said it socked away $1.53 billion to cover future loan losses, within the range of $1.5 billion to $1.6 billion it forecast in December. (AP)

Continental Airlines Inc., the fourth-largest US carrier, posted a fourth-quarter pretax profit of $71 million as it raised fares and flew more passengers.

That compared with a pretax and net loss of $26 million a year ago, the Houston-based airline said. Sales rose 12 percent to $3.52 billion.

Markets outside the United States provided 46 percent of passenger revenue, excluding regional partners. Passenger revenue on trans-Atlantic routes climbed 11 percent, compared with 6 percent in the United States.

The airline said it can't report net results because it hasn't determined the charge to write down the value of future tax benefits from pension plans. (Bloomberg)

BlackRock Inc., the biggest publicly traded asset manager in the United States, said fourth-quarter earnings jumped 90 percent, beating analysts' estimates, as hedge fund fees almost quadrupled and acquisitions increased assets.

Net income rose to $322.4 million, or $2.43 a share, from $169.4 million, or $1.28, the New York company said.

Chief executive Laurence Fink has used acquisitions including Merrill Lynch & Co.'s investment unit and Quellos Group LLC's hedge fund subsidiary to double assets to $1.4 trillion and increase earnings for five consecutive quarters.

Performance fees, earned from exceeding investment benchmarks, soared to $153 million from $40 million, driven by hedge-fund investments in energy and fixed income.

Investors poured $30.7 billion into BlackRock funds in the quarter.

BlackRock beat analysts' estimates on net income and an adjusted basis, which excludes one-time costs and gains.

Three analysts surveyed by Bloomberg had expected net income of $2.18 a share.

Including the effect of Quellos's acquisition, BlackRock earned $2.52 a share, compared with the $2.15-a-share average estimate of nine analysts. (Bloomberg)