As noted by our ever-observant readers, Merrill Lynch has been laying out exactly what it has it its write-down closet.
There’s the $14.1bn of writedowns, up the top of the release. Those consist of $9.9bn on ABS CDOs and subprime mortgage exposure, and a $2.6bn adjustment related to hedges on super senior ABS CDOs struck with “financial guarantors” - or the bond insurers.
But it doesn’t stop there. The bank has laid out a string of other small writedowns which don’t feature in the headline $14.1bn. For a start, there’s another $500m related to financial guarantors.
Points for disclosure, yes. But could these not have been added up somewhere more prominent? Or at least put in a convenient table?
So we have a $400m writedown on the bank’s book of Alt-A mortgages, or about 13 per cent of its exposure in September, which now stands at $2.7bn.
On non-US mortgages, the writedown is $500m but is smaller as a proportion of the bank’s exposure, at just 4 per cent. It now has $9.6bn of exposure in that pot.
Then onto leveraged finance and CRE, which is likely to come into its own as a source for angst in the coming months. But for the fourth quarter Merrill took only a $230m hit, on exposure of $18bn at the end of December. No details on what that $18bn consists of…yet.
Merrill has another $18bn in leveraged finance commitments, down more than 40 per cent from the end of the third quarter. And good news, they only merited a $126m writedown. Things in that corner of the business at least look to be stabilising.
Finally comes the US banks investment securities portfolio, which includes all manner of RMBS, CMBS and ABS, writedowns on which hit the income statement to the tune of $869m.
So we make that, right, an additional $2.6bn of value written off in the fourth quarter. Not huge in the context, but notable nonetheless.
All of which funnelled into the negative revenues of $15.2bn for the bank’s fixed income, currency and commodities business, and a fourth quarter net loss of $9.8bn.
