Merrill Lynch To Cut 3,400 Jobs

The ugly details of damage done to U.S. brokerage firms by emerging markets turmoil and hedge fund losses in the third quarter are beginning to show up.

The brokerages have traded down sharply on expectations and amid warnings that third quarter profits would take hits from the global sell off, but now investors have the reports.

Merrill Lynch (MER) and Donaldson, Lufkin & Jenrette (DLJ) opened the gate on Tuesday, reporting ahead of the open.

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Merrill Lynch (MER)
"As everyone realizes, this was a difficult period for the securities industry," said DLJ CEO Joe Roby and Chair John Chalsty in a joint statement. "Unprecedented volatility in the world's capital markets brought new issue calendars to a standstill for much of the quarter and caused interest rate spreads over Treasurys on fixed-income securities to widen dramatically."

Giant Merrill Lynch posted its first quarterly loss in nine years on Tuesday, saying it lost $164 million, or 42 cents a share compared to a $1.24 per share gain a year ago, Reuters reported. The results fell shy of already-trimmed consensus estimates of 45 cents a share for operating results.

Blaming trading losses overseas and a business slowdown, Merrill said it would lay off 3,400 people and trim 900 consultants to control costs. It took a $288 million charge in the quarter to cover severance costs, and reported earnings of $124 million without the charge.

Merrill's global workforce numbers 65,000. Other Wall Street firms, such as Citigroup's (CCI) Salomon Smith Barney, have indicated they will also trim their workforce.

Donaldson, Lufkin & Jenrette said net income for the third quarter was $25.7 million, or 15 cents per share adjusted for a two-for-one stock, down 84 percent from the 93 cents per share in the year-ago period.

The consensus estimate from First Call for the firm was 13 cents a share.

DLJ said underwriting revenues "slowed substantially" to $122 million in the quarter; they accounted for 29 percent of net revenue in the first half of the year.

Written By Emily Church