New Chief of Merrill Lynch warns of further write-downs

Nov 16, 2007

New chief warns of further write-downs

NEW YORK - MR JOHN Thain, the new chairman and chief executive of Merrill Lynch, said prices for sub-prime mortgages and collateralised debt obligations (CDOs) would likely deteriorate further in the next three to six months, potentially necessitating further write-downs in the industry.

In an interview on CNBC television on Wednesday, Mr Thain said that he was not inclined to quit the mortgage and CDO markets, but that Merrill Lynch needed to properly manage its risk exposures. He said further write-downs in the industry were possible because of pricing pressures.

But there was news that gave comfort to investors still fearful of more CDO write-downs by investment banks. British bank Barclays yesterday announced a less-than-expected £1.3 billion (S$3.9 billion) write-down for its investment bank arm, Barclays Capital, due to its exposure to credit market problems. Barclays Capital made a pre-tax profit of £1.9 billion for the 10 months ended October, ahead of the same period last year.

Barclays also said the United States sub-prime housing crisis might take up to two years to work through. A day earlier, US brokerage Bear Stearns said it would take a US$1.2 billion (S$1.7 billion) write-down.

REUTERS, NEW YORK TIMES