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NEW YORK, July 17 – Merrill Lynch (NYSE: MER) today reported a net loss from continuing operations for the second quarter of 2008 of $4.6 billion, or $4.95 per diluted share, compared to net earnings from continuing operations of $2.0 billion, or $2.10 per diluted share, for the second quarter of 2007. Merrill Lynch’s net loss for the second quarter of 2008 was $4.7 billion, or $4.97 per diluted share, compared to net earnings of $2.1 billion, or $2.24 per diluted share, for the year-ago quarter. Second quarter 2008 results included a restructuring charge of $445 million pre-tax ($286 million after-tax) arising from headcount reductions completed during the quarter. Subsequent to the end of the second quarter, Merrill Lynch continues to enhance its capital position. Earlier today, Merrill Lynch completed the sale of its 20% ownership stake in Bloomberg, L.P. to Bloomberg Inc., for $4.4 billion, and as part of this transaction has entered into a long-term service agreement. Merrill Lynch is also in negotiations and has signed a non-binding letter of intent to sell a controlling interest in Financial Data Services, Inc. (FDS), based on an enterprise value for FDS in excess of $3.5 billion. FDS is currently a wholly-owned subsidiary of Merrill Lynch and is a provider of administrative functions for mutual funds, retail banking products and other services within Global Wealth Management (GWM). Merrill Lynch has provided Bloomberg Inc. with debt financing and intends to provide debt financing for the FDStransaction on a commercially reasonable basis. In a challenging market environment, Merrill Lynch’s core businesses continued to perform well; however, second quarter 2008 net revenues were negative $2.1 billion,compared with positive $9.5 billion in the prior-year period. The revenue decline was driven by net losses totaling $3.5 billion related to U.S. super senior ABS CDOs(1) and credit valuation adjustments of negative $2.9 billion related to hedges with financial guarantors, about half of which related to U.S. super senior ABS CDOs. Othersignificant net losses included $1.7 billion in the investment portfolio of Merrill Lynch’s U.S. banks, as well as $1.3 billion from certain residential mortgage exposures. Activeefforts to reduce risk through asset sales combined with these net losses, resulted in meaningful exposure reductions for many of these asset classes. Net revenues for the second quarter were $7.5 billion, excluding these net losses, credit valuation adjustments and a $91 million net benefit related to credit spread widening onMerrill Lynch’s long-term debt liabilities. On a comparable basis, these revenues weredown 21% from the prior-year period but up slightly from the first quarter of 2008,reflecting the strength and stability of the firm’s core franchise. The net loss from continuing operations for the first six months of 2008 was $6.6 billion,or $7.17 per diluted share, compared with net earnings from continuing operations of$4.0 billion, or $4.22 per diluted share, in the prior-year period. The first half 2008 netloss and loss per diluted share were $6.6 billion and $7.18, respectively, compared to netearnings of $4.3 billion, or $4.50 per diluted share, for the prior-year period. First half 2008 net revenues were $818 million compared to $19.1 billion in the prior-year period. Excluding the net losses, credit valuation adjustments and a $2.2 billion net benefit related to credit spread widening on Merrill Lynch’s long-term debt liabilities, first half 2008 net revenues were $14.9 billion, down 22% from the prior-year period. Second Quarter and First Half 2008 Highlights • Record first half revenues in Rates and Currencies and third-highest quarterly revenues • Record first half and quarterly revenues in Global Markets Financing and Services, demonstrating double-digit growth, both year-on-year and sequentially • Nearly 60% growth in Commodities quarterly revenues compared to the prior-year• Strong Investment Banking revenues of more than $1 billion for the quarter, where the firm ranked #3 globally for debt and equity origination fees • Continued solid revenues in GWM, with recurring revenues greater than 70% of total net revenues, a near-record proportion • Non-U.S. revenue growth of 13% sequentially during the quarter driven by strong performance in the Europe, Middle East and Africa (“EMEA”) region, up more than 30% • Significant progress in balance sheet and risk reduction during the quarter, including reductions of 51% in U.S. Alt-A residential mortgages and 29% in U.S. sub-prime residential mortgage net exposures, 47% in leveraged finance, and 17% in commercial real estate net exposures, excluding First Republic Bank • Record excess liquidity pool of approximately $92 billion, up significantly from thefirst quarter of 2008. “Our core franchise continues to perform well despite the extremely challenging marketenvironment,” said John A. Thain, chairman and chief executive officer. “Against thisbackdrop, we increased our excess liquidity pool to a record level of $92 billion andsignificantly reduced our exposures in key asset classes. Importantly, with thetransactions we announced today, we are bolstering our capital base and continue to move forward on our risk management and strategic growth initiatives.”
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