BusinessCompany NewsMerrill Lynch warns of more sub-prime hits

Merrill Lynch warns of more sub-prime hits

Merrill Lynch takes $7.9bn sub-prime hit and warns that worst is to come

US investment bank Merrill Lynch yesterday revealed that it had taken a
$7.9bn (£3.5bn) hit from its exposure to sub-prime mortgages and warned that
further bad news could be around the corner.

The bank said it had taken a conservative view in its valuations, but said
that because valuations in a frozen market were so difficult to calculate,
further hits down the line were a possibility.

Accounting rules allow banks to mark sub-prime instruments to model in a
frozen market, but such modelling is notoriously complicated and open to error.

US investment banks have taken billions of dollars in write-downs from
sub-prime exposures.

Further reading:

Further writedowns expected for US
banks

Financial markets: is there a monster in the
closet?

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