Merrill Lynch may be forced to pre-announce another big writedown of mortgage-related losses in the coming days or weeks, according to senior people at the firm.
As previously reported, the brokerage giant may write down anywhere from $3 billion to $6 billion in additional losses besides the $8.4 billion announced in November. That could bring the total writedown to more than $14 billion.
Companies generally pre-announce some details of their quarterly results to give investors ample notice that bad news may be on the horizon and avoid a sharp decline in share price when the earnings are actually reported.
In the case of Merrill , that bad news involves additional writedown of losses stemming from billions of dollars it holds of depressed mortgage-backed securities it couldn't sell to investors.
Of course, the markets could improve and the writedowns could come in at the lower end of the estimate. But people inside the firm say that is unlikely and there are rumblings in the executive ranks about pre-announcing a huge writedown before the mid-January earnings report to get the bad news behind the firm.