Merrill 3Q Roiled by Mortgage Crisis

The New York-based company reported a loss after paying preferred dividends of $2.31 billion, or $2.82 per share, compared to a profit of $3 billion, or $3.50 per share, a year earlier. Revenue fell 94 percent to $577 million from $9.83 billion a year earlier.

Results missed Wall Street expectations for a loss of 45 cents per share on $3.25 billion of revenue, according to analysts polled by Thomson Financial.

Merrill announced on Oct. 5 that it expected to write down almost $5 billion for the quarter that ended in September because of its exposure to risky mortgage-related securities.

The bulk of the losses came from marking down the value of complex financial instruments known as collateralized debt obligations, or CDOs, and from declines in subprime mortgages -- loans to customers with shaky credit.

Chief Executive Stan O'Neal said the company continues to face uncertainty remaining the impact of its mortgage-related investments.

"In light of difficult credit markets and additional analysis by management during our quarter-end closing process, we re-examined our remaining CDO positions with more conservative assumptions," he said in a statement. "The result is a larger write-down of these assets than initially anticipated."