Earnings at the third-largest investment bank were dragged down by $6.5 billion in write-downs as the firm restated the value of its troubled assets, including mortgages and leveraged loans to companies with heavy debt. The adjustments bring Merrill's write-downs for the past three quarters to more than $30 billion. Revenue fell 69 percent, to $2.9 billion.  In reporting its third straight quarterly loss, the bank said its exposure to collateralized debt obligations, responsible for much of the meltdown in credit markets, actually increased in the first three months of the year. This is partly because the steps Merrill had taken to hedge, or reduce the risk of falling prices, had failed.  Taken together with grim earnings reports this week from Wachovia, J.P. Morgan Chase and Wells Fargo, Merrill's results indicate that the credit crisis is far from over.  "It's going to take time," said Bernard Baumohl, managing director of the Economic Outlook Group. "We are really stuck in sluggish economic activity."  Despite Merrill's results, which were worse than most analysts' expectations, its shares rose more than 4 percent Thursday. This is an indication of how low the bar had been set for a beleaguered financial sector that has repeatedly reported disastrous earnings, analysts said.  "The market is relieved that Merrill's numbers weren't worse," said Frederic V. Malek, chairman and founder of Thayer Capital, a District-based private-equity firm.  Investors also appeared to be soothed by John A. Thain, chief executive of Merrill, who sounded largely upbeat during a conference call with analysts. That was in sharp contrast to the previous quarter, when he called the results "unacceptable." Thain took over the firm in December after heavy losses and questions about the firm's risk management practices had prompted the resignation of E. Stanley O'Neal.  Though Thain said Thursday that credit conditions are as difficult as "I've seen in my 30 years on Wall Street," he applauded the firm for hitting record revenue in some of its businesses, such as global wealth management. Thain also said the firm was "well-capitalized" and would not have to raise additional funds. In recent months, Merrill raised more than $12 billion in capital, including from sovereign wealth funds controlled by foreign governments.  He expects Merrill to become more profitable as the year goes on. The firm is "optimistic for our results for the full-year 2008," he said.  Thain's comments echoed recent statements by heads of rival firms.  Jamie Dimon, chief executive of J.P. Morgan Chase, which Wednesday reported quarterly earnings that fell by half from a year ago, said the credit crisis was "maybe 75 percent to 80 percent" over. Richard S. Fuld Jr., head of Lehman Brothers, also told shareholders at the company's annual meeting a day earlier that the worst was over. And last week, Goldman Sachs chief executive Lloyd Blankfein reassured investors that "we're closer to the end than the beginning."  But analysts said investors should take such words with a heavy dose of skepticism, noting that previous statements of cautious optimism had turned out to be incorrect.  "This is a crisis of confidence, and a lot of them probably think that sounding confident and acting like things are going to get better may restore investor confidence," said Chris Carwile, an analyst with SNL Financial. "I think they're sort of doing it out of necessity, to be honest with you. If they go out and talk about how abysmal the situation really may be, that's not necessarily going to help their share price."  Investors have staged small rallies only to be surprised by a dislocation in a new part of the credit market, and analysts have had to revise earnings estimates for financial institutions in the past several quarters.  For example, at the beginning of the fourth quarter, analysts estimated that financial companies represented in the Standard & Poor's 500-stock index would see earnings grow 7 percent, according to Thomson Financial. By the end of the quarter, the analysts were estimating losses of 66 percent. In the end, the actual loss was 123 percent.  "There's this constant view by many people in the equity markets that we are at a low point and everything is going to rebound by the second half and now is the time to buy," said Eric D. Hovde, who runs a District-based hedge fund that trades in bank stocks. "It's ridiculous. What people aren't recognizing is that the fundamental business model has been materially impacted in a negative way. . . . You are seeing credit deteriorating and starting to spread into other asset classes."
NEW YORK, April 17 -- Merrill Lynch, badly hurt by its foray into risky securities, on Thursday reported a loss of nearly $2 billion in the first quarter and said it would cut 3,000 jobs over the next three months.