Merrill Lynch & Co., the biggest U.S. broker, lost about $135 million in bond trading during July and August amid economic problems in Russia and heightened credit concerns in the corporate debt market.
The New-York based securities firm said Tuesday it recorded the loss after it marked down the value of securities it holds for itself and its customers. Russian securities represented the biggest part of the loss, with the rest coming from Latin American debt and U.S. corporate bonds, a spokesman said.
Merrill has earned $102 million so far in the third quarter, well below the $545 million for the second quarter. The profit of about $50 million a month in July and August is the lowest in almost four years. The losses may prompt "selective expense reductions," Merrill said. Those may include job cuts, a spokesman said.
The trading loss is "not pretty--just like it's not pretty for everyone else," said Steven Eisman, an analyst at CIBC Oppenheimer.
Losses in Russia and plunging bond markets from Asia to South America saddled U.S. banks and brokerage firms, including Bankers Trust Corp. and Salomon Smith Barney Inc., with losses totaling hundreds of millions of dollars.
Merrill released the information after the market closed.
Merrill shares rose $4.31 to $66 on the New York Stock Exchange amid a rally in U.S. stocks driven by speculation the Federal Reserve Board may cut interest rates before long to help cushion the U.S. economy from a slowdown overseas.
Merrill is down nearly 40% since reaching a record high of $107.94 on July 17.