Merrill Lynch writes down extra $9.4bn

Merrill Lynch wrote off another $9.4bn from the value of its holdings in US mortgages and derivatives last night, taking its total writedowns since the credit crisis began to more than $40bn.

The investment banking giant, one of the biggest issuers of mortgage derivatives during the US housing boom, is scrambling to sell assets to make up for the losses in its trading operations.

It confirmed it would sell its 20 per cent stake in Bloomberg, the financial information giant, for $4.4bn and said it is also close to selling its controlling interest in Financial Data Services, a business administration division, for a further $3.5bn.

The assets sales did little to impress Wall Street, which focused on the larger than expected writedowns and sent Merrill shares swinging wildly in after-hours trading.

John Thain, its chief executive, said the losses had been exacerbated by the problems at the monoline insurance companies Ambac and MBIA, which Merrill has relied on to hedge its exposure to the mortgage market. "Our core franchise continues to perform well despite the extremely challenging market environment," he said.

The larger-than-expected loss, announced after trading on Wall Street had ended for the day, took the shine off the earlier rally in financial stocks and darkened expectations for results from Citi-group this morning.

Earlier yesterday, JPMorgan Chase said its second-quarter profits fell by more than half because of $1.1bn (£550m) of investment banking writedowns, but the results beat expectations.

The writedowns, mainly for mortgages and leveraged buyout loans, helped drive net income down 53 per cent to $2bn from $4.2bn a year earlier. Write-downs, losses and bad-debt provisions at JPMorgan since the start of last year total more than $10bn but the hit has been far smaller than those taken by rivals such as Citi and Merrill, which were more exposed to credit markets at the heart of the financial crisis.

JPMorgan said it was taking market share from rivals, helping to boost investment banking income and retail financial services.

But Jamie Dimon, its chief executive, warned that the financial turmoil was far from over. "Our expectation is for the economic environment to continue to be weak – and to likely get weaker – and for the capital markets to remain under stress," he said.