Merrill Lynch today reported a US$5.1 billion net loss from continuing operations for the third quarter, compared with a US$2.4 billion loss in the same quarter last year.

The firm said that its third quarter net revenues were just US$16 million, driven by a number of significant unusual items, including:

> net writedowns of US$5.7 billion resulting from the sale of U.S. super senior ABS CDOs and the termination and potential settlement of related hedges with monoline guarantor counterparties;

> a pre-tax gain of US$4.3 billion from the sale of the 20% ownership stake in Bloomberg, L.P.;

> net writedowns of US$3.8 billion principally from severe market dislocations in September, including real estate-related asset write-downs and losses related to government sponsored entities and major U.S. broker-dealers, as well as the default of Lehman Brothers;

> gains of US$2.8 billion due to the impact of the widening of credit spreads on the carrying value of certain of long-term debt liabilities; and

> losses of US$2.6 billion resulting primarily from completed and planned asset sales across residential and commercial mortgage exposures.

Excluding these unusual items, adjusted net revenues were US$5.7 billion in the third quarter, down 31% on a comparable basis from the prior-year period, reflective of the challenging operating environment.

After the third quarter, and as part of Bank of America’s US$25 billion participation in the TARP Capital Purchase Program, Merrill Lynch expects to issue US$10 billion of non-voting preferred stock and related warrants to the U.S. Treasury pursuant to the program.

“We continue to reduce exposures and de-leverage the balance sheet prior to the closing of the Bank of America deal,” said John Thain, chairman and CEO of Merrill Lynch. “As the landscape for financial services firms continues to change and our transition teams make good progress, we believe even more that the transaction will create an unparalleled global company with pre-eminent scale, earnings power and breadth.”