Merrill Lynch today reported a net loss from continuing operations for the third quarter of US$2.3 billion, as it took a larger than expected US$7.9 billion in write downs related to the credit crunch.

The firm’s third quarter results reflect significant net write-downs and losses attributable to Merrill Lynch’s Fixed Income, Currencies & Commodities business, including write-downs of US$7.9 billion across CDOs and U.S. sub-prime mortgages, which are significantly greater than the incremental US$4.5 billion write-down Merrill Lynch disclosed at the time of its earnings pre-release.

These write-downs and losses were partially offset by strong revenues in Global Wealth Management, Equity Markets, and Investment Banking, particularly in regions outside of the US, the firm said.

Third quarter total net revenues of US$577 million decreased 94% from US$9.8 billion in the prior-year period and were down 94% from US$9.7 billion in the second quarter of 2007. Merrill Lynch’s third quarter 2007 pre-tax net loss was US$3.5 billion.

“Mortgage and leveraged finance-related write-downs in our FICC business depressed our financial performance for the quarter. In light of difficult credit markets and additional analysis by management during our quarter-end closing process, we re-examined our remaining CDO positions with more conservative assumptions. The result is a larger write-down of these assets than initially anticipated,” said Stan O’Neal, chairman and chief executive officer.

“We expect market conditions for sub-prime mortgage-related assets to continue to be uncertain and we are working to resolve the remaining impact from our positions,” O’Neal continued. “Away from the mortgage-related areas, we continue to believe that secular trends in the global economy are favorable and that our businesses can perform well, as they have all year.”

As a result of the poor third quarter performance, Merrill’s net revenues for the first nine months of 2007 were US$20.0 billion, down 23% from US$25.8 billion in the comparable 2006 period. Net earnings were down 61% from the prior-year period.

Based on current market conditions, the firm said its liquidity position is strong. “Because the markets are unsettled, and market conditions that affect the company’s liquidity may become more severe, the company is continuing to closely monitor its liquidity and is pursuing opportunities to preserve and enhance its liquidity and capital position,” it added.