Merrill Takes a Mammoth Hit

Merrill Lynch (MER Quote) said third-quarter profits will be wiped out by a huge writedown tied to this summer's credit crunch.

The New York-based brokerage firm said it expects to lose 50 cents a share for the quarter, reversing the year-ago $2-a-share profit and falling well short of analysts' $1.24-a-share profit forecast.

Merrill will take $4.5 billion in writedowns on its holdings of collateralized debt obligations and subprime mortgages. It will also write off $967 million worth of leveraged lending commitments.

The charges mean that Merrill has taken the biggest hit on Wall Street from this summer's turmoil in the credit markets. Last month's writedowns at rivals Goldman Sachs (GS Quote), Lehman (LEH Quote) and Bear Stearns (BSC Quote) were generally around the $1 billion range. ...