Merrill Lynch seen cutting 1,600 jobs after Q4 write-downs

Mumbai: Merrill Lynch & Co is set to lay off 1,600 of its staff after disclosing fourth-quarter write-downs, a CNBC report said.

The layoffs are likely to be in trading positions and related areas, and will not likely include the investment banking or private client groups, the CNBC report said.

Merrill Lynch had about 64,000 employees as of the end of September, so 1,600 layoffs would represent less than 3 per cent of its work force.

Despite some appropriate actions recently taken by several firms in terms of raising capital and taking write-downs, the credit crisis still needs a couple of quarters before it is fully digested by the market, according to Goldman Sachs analysts.

He forecast loss for Merrill to jump to $7 per share from $1.50 due to expectations for a $11.5-billion CDO-related write-off, compared to prior estimates of $6-billion. He raised the 2008 estimate since losses assumed in 2008 moved to the fourth quarter, while dilution from Merrill's recent raising of $6.2-billion in capital is expected to result in a lower 2009 estimate.

Merrill Lynch & Co. Citigroup Inc. and JPMorgan Chase & Co together are expected to write down an additional $34 billion in securities linked to the collapse of the subprime mortgage market, according to Goldman Sachs.
 
The market for collateralized debt obligations, loans packaged into new securities, has dried up after surging sub prime mortgage defaults led to rating downgrades and convinced many investors to buy only the safest debt.