More Pain Likely At Merrill, BofA Writes Down $3bn More

Deutsche Bank analyst Michael Mayo has been talking to Fortune magazine, and mentioned in passing his views on Merrill Lynch.

Mayo pointed out that 'seven-eighths of the firm is performing well' and that 'only 100 or so employees out of 64,000 caused the lion's share of the (firm's) write-downs'. The analyst said that he feels that Merrill could write down an additional $5bn - $10bn in the fourth-quarter, and that this could trigger 'downgrades and possibly regulatory involvement'. MarketWatch reports that although BlackRock founder Larry Fink is taking his time thinking about whether he wants the top job at Merrill, he remains the favourite to become the firm;s next CEO. DealBreaker suggests that, should Fink come on board, 25% of Merrill's fixed income staff would be given their marching orders.

And Bank of America (BofA) appears to have been a bit guilty of news management Tuesday. Confirming that it will take a pretax write-down of around $3bn in the fourth-quarter on exposure to collateralized debt obligations (and spend up to $600m propping up certain money market funds), the firm also let it drop that it was on track to book a potential one-off gain of up to $30bn on its investment in China Construction Bank (CCB). According to The Financial Times, BofA paid $3bn for an 8% stake in CCB two years ago. The US bank plans to record $16bn of the $30bn gain in the fourth quarter. What good timing.

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