Merrill May Need to Raise More Capital, Insiders Say
Merrill Lynch may need more capital in the future—either through asset sales or raising money—despite CEO John Thain's recent comments that the firm has enough capital for now, senior executives told CNBC.
Thain's statement last week that Merrill does not plan to raise further capitalwas ill-advised, these executives said.
Merrill has raised about $12.8 billion since late 2007, following heavy subprime losses in the third and fourth quarters. But Thain said last week that the firm had raised more capital than it has lost.
"I wish he didn’t say that," Merrill Chief Financial Officer Nelson Chai has said, believing the firm still has balance sheet issues and may need to write down further losses.
Merrill Lynch declined to comment on the executives' statements.
Some big Merrill Lynch assets that could be sold include the company's stake in information services firm Bloomberg and its stake in money manager Blackrock. But analysts doubt Merrill can afford unwinding its Blackrock stake.
As reported by CNBC, Merrill will report a quarterly loss this week, including a writedown of about $6.5 billion. The firm also is expected to further discuss how it has been reducing its balance sheet.
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Investors have been bracing for more bad news from big U.S. banks reporting their first-quarter results this week as the housing market collapse and credit market turmoil have taken a big toll on their balance sheets.
Merrill is preparing a cost-saving plan that will include job cuts of 10 to 15 percent in some struggling business areas, such as bond financing, the Wall Street Journal reported.
JPMorgan Chase, which took over hard-hit investment bank Bear Stearns last month, said Wednesday that its earnings fell 50 percent, though the firm beat analyst expectations.
Wells Fargoalso topped forecasts Wednesday.
Merrill issues its results on Thursday.
Earlier in the week, Wachovia , the number four U.S. bank, posted a surprise first-quarter loss as losses from its mortgage portfolio worsened.
It also cut its dividend and raised $7 billion of capital.
- Reuters contributed to this report.