The Writedown Leaderboard: Merrill Now in First

We all remember the line in Animal House where John Belushi says, "Seven years of college down the drain." Well, Merrill Lynch did their best impersonation of Belushi when they wrote down $7.9 billion in assets this morning.

To put that in perspective, Merrill Lynch's (MER) total net earnings in 2006 were $7.499 billion, which is 5% less than the writedown for Q3.

While investment banks are always fighting to be at the top of the leader board when it comes to industry rankings in categories such as M&A fees and Underwriting, one list they do not want to be at the top of is writedowns. Below we highlight the magnitude of writedowns by various banks and brokerages. After today's earnings announcement, Merrill Lynch (MER) leads the list with $7.9 billion.

While Bear Stearns (BSC) was originally labeled the poster child for the subprime mess, they may be getting a bad rap given they are currently at the bottom of the list. Another interesting characteristic of the list is how so many of these banks seemed to coincidentally have the same amount of exposure. Note how Deutsche Bank (DB) and UBS (UBS) each had $3.4 billion in write-downs, JP Morgan (JPM) and Wachovia (WB) each had $1.3 billion, and Lehman (LEH) and BSC each had $700 million.

Just how exact were the calculations that went into these figures?

Comments

[PC&G:]

So much corporate experience ( www.newsvisual.com/new... ), yet so little of it in risk management.

2007 Oct 24 05:51 PM

[Anonymous 2:]

I look forward to the authors doing an update 30 days after each of the next 3 quarters showing these updated revised data and the next three quarter's additional writeoffs and cumulative write offs - in a total of eventually 5 columns - to help understand the full extent these 11 "leaders" have accurately reflected (reported) their exposure. Additional column(s) could be added showing the quarterly "market values" to help recognize the relationship bewteen the size of the write offs relative to the size of the compoany.

2007 Oct 25 12:36 PM