EX-99.2 3 a5804984ex992.htm EXHIBIT 99.2

Exhibit 99.2

Merrill Lynch & Co., Inc.   Attachment I
     
Preliminary Unaudited Earnings Summary
 
For the Three Months Ended Percent Inc / (Dec)
Sep. 26, Jun. 27, Sep. 28 3Q08 vs. 3Q08 vs.
(in millions, except per share amounts) 2008 2008 2007 2Q08 3Q07
 
Revenues
Principal transactions $ (6,573 ) $ (4,083 ) $ (5,761 ) N/M N/M %
Commissions 1,745 1,811 1,860 (4 ) (6 )
Managed accounts and other fee-based revenues 1,395 1,399 1,392 (0 ) 0
Investment banking 845 1,158 1,277 (27 ) (34 )
Earnings from equity method investments 4,401 111 412 N/M N/M
Other (1)   (2,986 )   (1,875 )   (1,114 ) N/M N/M
Subtotal (1,173 ) (1,479 ) (1,934 ) N/M N/M
 
Interest and dividend revenues 9,019 7,535 15,636 20 (42 )
Less interest expense   7,830     8,172     13,322   (4 ) (41 )
Net interest (loss)/profit   1,189     (637 )   2,314   N/M (49 )
 
Revenues, net of interest expense   16     (2,116 )   380   N/M (96 )
 
Non-interest expenses
Compensation and benefits 3,483 3,491 1,979 (0 ) 76
Communications and technology 546 566 499 (4 ) 9
Brokerage, clearing, and exchange fees 348 370 364 (6 ) (4 )
Occupancy and related depreciation 314 328 295 (4 ) 6
Professional fees 242 263 245 (8 ) (1 )
Advertising and market development 159 166 181 (4 ) (12 )
Office supplies and postage 48 55 54 (13 ) (11 )
Other 588 311 401 89 47
Payment related to price reset on common stock offering 2,500 - - N/M N/M
Restructuring charge   39     445     -   (91 ) N/M
 
Total non-interest expenses   8,267     5,995     4,018   38 106
 
Pre-tax loss from continuing operations (8,251 ) (8,111 ) (3,638 ) N/M N/M
 
Income tax benefit   (3,131 )   (3,477 )   (1,258 ) N/M N/M
 
Net loss from continuing operations   (5,120 )   (4,634 )   (2,380 ) N/M N/M
 
Discontinued operations:
Pre-tax (loss)/earnings from discontinued operations (53 ) (32 ) 211 N/M N/M
Income tax (benefit)/expense   (21 )   (12 )   72   N/M N/M
Net (loss)/earnings from discontinued operations   (32 )   (20 )   139   N/M N/M
 
Net loss $ (5,152 ) $ (4,654 ) $ (2,241 ) N/M N/M
 
Preferred stock dividends $ 2,319   $ 237   $ 73   N/M N/M
 
Net loss applicable to common stockholders $ (7,471 ) $ (4,891 ) $ (2,314 ) N/M N/M
 
Basic loss per common share from continuing operations (5.56 ) (4.95 ) (2.99 ) N/M N/M
Basic (loss)/earnings per common share from discontinued operations   (0.02 )   (0.02 )   0.17   N/M N/M
Basic loss per common share $ (5.58 ) $ (4.97 ) $ (2.82 ) N/M N/M
 
Diluted loss per common share from continuing operations (5.56 ) (4.95 ) (2.99 ) N/M N/M
Diluted (loss)/earnings per common share from discontinued operations   (0.02 )   (0.02 )   0.17   N/M N/M
Diluted loss per common share $ (5.58 ) $ (4.97 ) $ (2.82 ) N/M N/M
 
Average shares used in computing earnings per common share
Basic 1,339.0 984.1 821.6 36 63
Diluted 1,339.0 984.1 821.6 36 63
 
                     
N/M = Not Meaningful
Note: Certain prior period amounts have been reclassified to conform to the current period presentation.
(1) Includes gains and losses on investment securities, private equity investments, loans and other miscellaneous items.
13

Merrill Lynch & Co., Inc. Attachment II
 
Preliminary Unaudited Earnings Summary
 
For the Nine Months Ended
Sep. 26, Sep. 28, Percent
(in millions, except per share amounts) 2008 2007 Inc / (Dec)
 
Revenues
Principal transactions $ (13,074 ) $ 529 N/M %
Commissions 5,445 5,360 2
Managed accounts and other fee-based revenues 4,249 4,025 6
Investment banking 2,920 4,315 (32 )
Earnings from equity method investments 4,943 1,096 N/M
Other (1)   (6,310 )   114 N/M
Subtotal (1,827 ) 15,439 N/M
 
Interest and dividend revenues 28,415 42,804 (34 )
Less interest expense   25,754     38,801 (34 )
Net interest profit   2,661     4,003 (34 )
 
Revenues, net of interest expense   834     19,442 (96 )
 
Non-interest expenses
Compensation and benefits 11,170 11,564 (3 )
Communications and technology 1,667 1,460 14
Brokerage, clearing, and exchange fees 1,105 1,020 8
Occupancy and related depreciation 951 833 14
Professional fees 747 716 4
Advertising and market development 501 536 (7 )
Office supplies and postage 160 169 (5 )
Other 1,212 1,055 15
Payment related to price reset on common stock offering 2,500 - N/M
Restructuring charge   484     - N/M
 
Total non-interest expenses   20,497     17,353 18
 
Pre-tax (loss)/earnings from continuing operations (19,663 ) 2,089 N/M
 
Income tax (benefit)/expense   (7,940 )   429 N/M
 
Net (loss)/earnings from continuing operations   (11,723 )   1,660 N/M
 
Discontinued operations:
Pre-tax (loss)/earnings from discontinued operations (110 ) 602 N/M
Income tax (benefit)/expense   (65 )   206 N/M
Net (loss)/earnings from discontinued operations   (45 )   396 N/M
 
Net (loss)/earnings $ (11,768 ) $ 2,056 N/M
 
Preferred stock dividends $ 2,730   $ 197 N/M
 
Net (loss)/earnings applicable to common stockholders $ (14,498 ) $ 1,859 N/M
 
Basic (loss)/earnings per common share from continuing operations (13.16 ) 1.75 N/M
Basic (loss)/earnings per common share from discontinued operations   (0.04 )   0.48 N/M
Basic (loss)/earnings per common share $ (13.20 ) $ 2.23 N/M
 
Diluted (loss)/earnings per common share from continuing operations (13.16 ) 1.60 N/M
Diluted (loss)/earnings per common share from discontinued operations   (0.04 )   0.43 N/M
Diluted (loss)/earnings per common share $ (13.20 ) $ 2.03 N/M
 
Average shares used in computing earnings per common share
Basic 1,098.6 832.2 32
Diluted 1,098.6 916.3 20
 
               
N/M = Not Meaningful
Note: Certain prior period amounts have been reclassified to conform to the current period presentation.
(1) Includes gains and losses on investment securities, private equity investments, loans and other miscellaneous items.
14

Merrill Lynch & Co., Inc. Attachment III
 
Preliminary Segment Data (unaudited)
         
    For the Three Months Ended Percent Inc / (Dec) For the Nine Months Ended  
Sep. 26, Jun. 27, Sep. 28,

3Q08 vs.

3Q08 vs. Sep. 26, Sep. 28, Percent
(dollars in millions) 2008 2008 2007 2Q08 3Q07 2008 2007

Inc / (Dec)

 
Global Markets & Investment Banking
Global Markets
FICC $ (9,943 ) $ (8,068 ) $ (5,764 ) N/M % N/M % $ (21,389 ) $ (718 ) N/M %
Equity Markets   6,030     1,727     1,581   249 281   9,640     6,115   58
Total Global Markets net revenues (3,913 ) (6,341 ) (4,183 ) N/M N/M (11,749 ) 5,397 N/M
Investment Banking (1)
Origination:
Debt 182 367 276 (50 ) (34 ) 780 1,333 (41 )
Equity 214 338 344 (37 ) (38 ) 751 1,254 (40 )
Strategic Advisory Services   354     317     385   12 (8 )   1,046     1,181   (11 )
Total Investment Banking net revenues   750     1,022     1,005   (27 ) (25 )   2,577     3,768   (32 )
Total net revenues   (3,163 )   (5,319 )   (3,178 ) N/M N/M   (9,172 )   9,165   N/M
 

Non-interest expenses before restructuring charge

2,833 2,929 1,434 (3 ) 98 9,119 9,633 (5 )
 
Restructuring charge 18 311 - N/M N/M 329 - N/M
 
Pre-tax (loss) / earnings from continuing operations (6,014 ) (8,559 ) (4,612 ) N/M N/M (18,620 ) (468 ) N/M
 
Pre-tax (loss) / earnings from continuing operations, before restructuring charge (5,996 ) (8,248 ) (4,612 ) N/M N/M (18,291 ) (468 ) N/M
 
Pre-tax profit margin N/M N/M N/M N/M -5.1 %
 
Pre-tax profit margin, before restructuring charge   N/M       N/M       N/M                 N/M       -5.1 %      
 
Global Wealth Management
Global Private Client
Fee-based revenues $ 1,568 $ 1,591 $ 1,605 (1 ) (2 ) $ 4,784 $ 4,622 4
Transactional and origination revenues 729 897 989 (19 ) (26 ) 2,552 2,915 (12 )
Net interest profit and related hedges(2) 587 604 584 (3 ) 1 1,829 1,753 4
Other revenues   110     74     90   49 22   295     300   (2 )
Total Global Private Client net revenues   2,994     3,166     3,268   (5 ) (8 )   9,460     9,590   (1 )
Global Investment Management net revenues   241     193     270   25 (11 )   733     836   (12 )
Total net revenues   3,235     3,359     3,538   (4 ) (9 )   10,193     10,426   (2 )
 
Non-interest expenses before restructuring charge 2,461 2,621 2,585 (6 ) (5 ) 7,961 7,710 3
 
Restructuring charge 21 134 - N/M N/M 155 - N/M
 
Pre-tax (loss) / earnings from continuing operations 753 604 953 25 (21 ) 2,077 2,716 (24 )
 
Pre-tax (loss) / earnings from continuing operations, before restructuring charge 774 738 953 5 (19 ) 2,232 2,716 (18 )
 
Pre-tax profit margin 23.3 % 18.0 % 26.9 % 20.4 % 26.1 %
 
  Pre-tax profit margin, before restructuring charge   23.9 %     22.0 %     26.9 %               21.9 %     26.1 %      
 
Corporate
Total net revenues $ (56 ) $ (156 ) $ 20 N/M N/M $ (187 ) $ (149 ) (26 )
 
Non-interest expenses before restructuring charge (3) 2,934 - (1 ) N/M N/M 2,933 10 N/M
 
Restructuring charge - - - N/M N/M - - N/M
 
Pre-tax (loss) / earnings from continuing operations   (2,990 )     (156 )     21     N/M     N/M         (3,120 )     (159 )   N/M    
 
Total
Total net revenues $ 16 $ (2,116 ) $ 380 N/M (96 ) $ 834 $ 19,442 (96 )
 
Non-interest expenses before restructuring charge 8,228 5,550 4,018 48 105 20,013 17,353 15
 
Restructuring charge 39 445 - N/M N/M 484 - N/M
 
Pre-tax (loss) / earnings from continuing operations

 

(8,251 ) (8,111 ) (3,638 ) N/M N/M (19,663 ) 2,089 N/M
 
 
Pre-tax profit margin

 

  N/M       N/M       N/M                 N/M       10.7 %      
 
N/M = Not Meaningful
Note: Certain prior period amounts have been reclassified to conform to the current period presentation.
(1) A portion of Origination revenue is recorded in Global Wealth Management.
(2) Includes interest component of non-qualifying derivatives which are included in Other Revenues in Attachment I and II.
(3) Includes expenses of $2.5 billion related to the Temasek reset payment and $425 million associated with the auction rate securities repurchase program.
15

Merrill Lynch & Co., Inc.   Attachment IV
       
Consolidated Quarterly Earnings (unaudited) (in millions, except per share amounts)
 
3Q07 4Q07 1Q08 2Q08 3Q08
Revenues
Principal transactions $ (5,761 ) $ (12,596 ) $ (2,418 ) $ (4,083 ) $ (6,573 )
Commissions
Listed and over-the-counter securities 1,279 1,294 1,319 1,221 1,220
Mutual funds 522 570 532 539 459
Other   59     60     38     51     66  
Total 1,860 1,924 1,889 1,811 1,745
Managed accounts and other fee-based revenues
Portfolio service fees 904 902 892 852 857
Asset management fees 150 179 206 198 196
Account fees 117 120 117 116 115
Other fees   221     239     240     233     227  
Total 1,392 1,440 1,455 1,399 1,395
Investment banking
Underwriting 895 717 543 841 490
Strategic advisory   382     550     374     317     355  
Total 1,277 1,267 917 1,158 845
Earnings from equity method investments 412 531 431 111 4,401
Other (1)   (1,114 )   (2,304 )   (1,449 )   (1,875 )   (2,986 )
Subtotal (1,934 ) (9,738 ) 825 (1,479 ) (1,173 )
Interest and dividend revenues 15,636 14,170 11,861 7,535 9,019
Less interest expense   13,322     12,624     9,752     8,172     7,830  
Net interest profit 2,314 1,546 2,109 (637 ) 1,189
 
         
Revenues, net of interest expense   380     (8,192 )   2,934     (2,116 )   16  
 
Non-Interest Expenses
Compensation and benefits 1,979 4,339 4,196 3,491 3,483
Communications and technology 499 597 555 566 546
Brokerage, clearing, and exchange fees 364 395 387 370 348
Occupancy and related depreciation 295 306 309 328 314
Professional fees 245 311 242 263 242
Advertising and market development 181 249 176 166 159
Office supplies and postage 54 64 57 55 48
Other 401 467 313 311 588
Payment related to common stock offering - - - - 2,500
Restructuring charge   -     -     -     445     39  
Total Non-Interest Expenses   4,018     6,728     6,235     5,995     8,267  
 
Pre-tax loss from continuing operations (3,638 ) (14,920 ) (3,301 ) (8,111 ) (8,251 )
Income tax benefit   (1,258 )   (4,623 )   (1,332 )   (3,477 )   (3,131 )
 
Net loss from continuing operations (2,380 ) (10,297 ) (1,969 ) (4,634 ) (5,120 )
 
Discontinued operations:
Pre-tax earnings/(loss) from discontinued operations 211 795 (25 ) (32 ) (53 )
Income tax expense/(benefit)   72     331     (32 )   (12 )   (21 )
Net earnings/(loss) from discontinued operations   139     464     7     (20 )   (32 )
 
Net loss $ (2,241 ) $ (9,833 ) $ (1,962 ) $ (4,654 ) $ (5,152 )
 
                     
Per Common Share Data
3Q07 4Q07 1Q08 2Q08 3Q08
 
Loss from continuing operations - Basic $ (2.99 ) $ (12.57 ) $ (2.20 ) $ (4.95 ) $ (5.56 )
Loss from continuing operations - Diluted (2.99 ) (12.57 ) (2.20 ) (4.95 ) (5.56 )
Dividends paid 0.35 0.35 0.35 0.35 0.35
Book value 39.60 29.34 25.93 21.43 18.59 est.
Adjusted book value (2) N/M N/M 28.93 24.94 18.90 est.
                     
N/M = Not Meaningful
Note: Certain prior period amounts have been reclassified to conform to the current period presentation.
(1) Includes gains and losses on investment securities, private equity investments, loans and other miscellaneous items.
(2) Adjusted book value per common share is calculated by dividing: common stockholders' equity after giving effect for conversion of convertible preferred on an "if-converted" basis by common shares outstanding adjusted for such conversion.
16

Merrill Lynch & Co., Inc.   Attachment V
       
Supplemental Data (unaudited) (dollars in billions)
 
3Q07 4Q07 1Q08 2Q08 3Q08
Client Assets
U.S. $ 1,601 $ 1,586 $ 1,479 $ 1,447 $ 1,333
Non - U.S.   161   165   158   158     142  
Total Client Assets 1,762 1,751 1,637 1,605 1,475
 
Assets in Annuitized-Revenue Products 691 655 607 630 580
                   
 
Net New Money (1) (2)
All Client Accounts $ 26 $ 30 $ 6 $ (5 ) $ (3 )
 
Annuitized-Revenue Products (3) 10 - 11 8 2
                   
 
Balance Sheet Information: (4)
Short-term Borrowings $ 27.1 $ 24.9 $ 21.6 $ 19.1 $ 25.7
Deposits 95.0 104.0 104.8 100.5 90.0
Long-term Borrowings 264.9 261.0 259.5 270.4 227.3
Junior Subordinated Notes (related to trust preferred securities) 5.2 5.2 5.2 5.2 5.2
 
Stockholders' Equity: (4)
Preferred Stockholders' Equity 4.8 4.4 11.0 13.7 8.6
Common Stockholders' Equity   33.8   27.5   25.5   21.1     29.8  
Total Stockholders' Equity 38.6 31.9 36.5 34.8 38.4
                   
 
Full-Time Employees (5) 64,200 64,200 63,100 60,000 60,900
 
Financial Advisors 16,610 16,740 16,660 16,690 16,850
                   
 
Common shares outstanding (in millions):
Weighted-average - basic 821.6 825.0 974.1 984.1 1,339.0
Weighted-average - diluted 821.6 825.0 974.1 984.1 1,339.0
  Period-end   855.4     939.1     985.1     985.4       1,600.1  
 
Note: Certain prior period amounts have been reclassified to conform to the current period presentation.
 
(1)

Net new money excludes flows associated with the Institutional Advisory Division which serves certain small- and middle-market companies, as well as net inflows at BlackRock from distribution channels other than Merrill Lynch.

 
(2) Net new money has been restated to include net inflows of assets which are not held in custody but generate fee revenue.
 
(3) Includes both net new client assets into annuitized-revenue products, as well as existing client assets transferred into annuitized-revenue products.
 
(4) Balance Sheet Information and Stockholders' Equity are estimated for 3Q08.
 
(5)

Excludes 400 full-time employees on salary continuation severance at the end of 3Q07, 700 at the end of 4Q07, 900 at the end of 1Q08, 2,800 at the end of 2Q08 and 300 at the end of 3Q08.

17

Merrill Lynch & Co., Inc. Attachment VI
         
(Unaudited) (dollars in billions)
 
 
 
U.S. Super Senior ABS CDO Exposure   Long   Short   Net
June 27, 2008 (As Reported In Earnings Release Dated 7/17/08) $ 19.9 $ (15.6 ) $ 4.3
Sale of CDOs:
Sale Price of CDOs (1) (6.7 ) -- (6.7 )
Loss on CDOs   (4.4 )     --       (4.4 )
Total Reduction in Exposure from Sale (11.1 ) -- (11.1 )
 
Tear-up of XL Hedges (2) -- 1.2 1.2
Settlement of Monoline Hedges on Long Position Sold (3)   --       7.2       7.2  
Total Increase in Exposure from Tear-ups -- 8.4 8.4
 
Total Exposure (As Reported in Press Release Dated 7/28/08) $ 8.8     $ (7.2 )   $ 1.6  
 
3Q Exposure Changes:
Gains / (Losses) $ (1.9 ) $ 1.6 $ (0.3 )
Liquidations / Amortization   (0.5 )     0.3       (0.2 )
September 26, 2008 $ 6.4     $ (5.3 )   $ 1.1  
 
As reported in Merrill Lynch's earnings release dated July 17, 2008, secondary trading exposure was $227 million for 2Q08.
As of 3Q08, exposure is $(273) million. Exposure change was driven by liquidations, unwinds, and gains / (losses) recognized.

(1) Merrill Lynch provided financing to the purchaser for approximately 75% of the purchase price. The recourse on this loan is limited to the assets of the purchaser, which will consist solely of the CDOs.

(2) Merrill Lynch terminated all of its CDO-related hedges with XL, which had a June 27, 2008 carrying value of $1,029 million in exchange for an upfront payment of $500 million. This termination resulted in a net loss of approximately $529 million.

(3) This includes both settled and potentially settled monoline hedges.
                                       
                 
Credit Default Swaps with Financial Guarantors on U.S. Super Senior ABS CDOs

Notional
of CDS

 

Net
Exposure

 

Mark-to-
Market
Prior
to Credit
Valuation
Adjustments

 

 

Life-to-Date
Credit
Valuation
Adjustments

 

Carrying
Value

June 27, 2008 (As Reported In Earnings Release Dated 7/17/08) $ (18.7 ) $ (9.6 ) $ 9.1 $ (6.2 ) $ 2.9
Tear-up of XL Hedges (1) 3.7 1.2 (2.5 ) 1.5 (1.0 )
Settlement of Monoline Hedges on Long Position Sold (2)   12.1         7.2         (4.9 )       4.1         (0.8 )
Total (As Reported in Press Release Dated 7/28/08) $ (2.9 )     $ (1.2 )     $ 1.7       $ (0.6 )     $ 1.1  
3Q Activity   0.0         0.3         0.3         (0.0 )       0.3  
September 26, 2008 $ (2.9 )     $ (0.9 )     $ 2.0       $ (0.6 )     $ 1.4  
 
 

(1) Merrill Lynch terminated all of its CDO-related hedges with XL, which had a June 27, 2008 carrying value of $1,029 million in exchange for an upfront payment of $500 million. This termination resulted in a net loss of approximately $529 million.

(2) This includes both settled and potentially settled monoline hedges.
18

Merrill Lynch & Co., Inc.       Attachment VII
     
(Unaudited) (dollars in millions)
 

Net
exposures as
of Jun. 27,
2008

 

 

Net
gains/(losses)
reported in
income

 

Other net
changes
in net
exposures (1)

 

 

Net
exposures as
of Sep. 26,
2008

 

 

Net exposures
inclusive of
planned sales

 

3Q08 vs.
2Q08
Percent
Inc/(Dec)

 

3Q08 vs. 2Q08
Percent
Inc/(Dec)
inclusive of
planned sales

Residential Mortgage-Related

(excluding U.S. Banks investment securities portfolio):

 
U.S. Prime (2) $ 33,718   $ (123 )   $ 1,042     $ 34,637   $ 34,637 3 % 3 %
 
Other Residential:
U.S. Sub-prime 1,012 (392 ) (325 ) 295 295 (71 )% (71 )%
U.S. Alt-A 1,542 (492 ) (1,025 ) 25 25 (98 )% (98 )%
Non-U.S.   7,448     (1,282 )     (1,522 )     4,644     3,250 (38 )% (56 )%
Total Other Residential (3) $ 10,002   $ (2,166 )   $ (2,872 )   $ 4,964   $ 3,570 (50 )% (64 )%
 
(1) Represents U.S. Prime originations, sales, foreign exchange revaluations, hedges, paydowns, changes in loan commitments and related funding.
(2)

As of September 26, 2008, net exposures include approximately $31 billion of prime loans originated with GWM clients (of which $14.5 billion were originated by First Republic Bank).

(3) Includes warehouse lending, whole loans and residential mortgage-backed securities.
                         
           

Net
exposures as
of Jun. 27,
2008

 

 

Net
gains/(losses)
reported in
income (2)

 

Unrealized
gains/(losses)
included in OCI
(pre-tax) (3)

 

 

Other net
changes in net
exposures (4)

 

Net
exposures as
of Sep. 26,
2008

 

 

Percent
Inc/(Dec)

U.S. Banks Investment Securities Portfolio:
Sub-prime residential mortgage-backed securities $ 2,901 $ (116 ) $ 24 $ (107 ) $ 2,702 (7 )%
Alt-A residential mortgage-backed securities 4,338 (622 ) (135 ) (83 ) 3,498 (19 )%
Commercial mortgage-backed securities 5,376 6 (370 ) 28 5,040 (6 )%
Prime residential mortgage-backed securities 3,114 (82 ) (152 ) (371 ) 2,509 (19 )%
Non-residential asset-backed securities 831 (8 ) (40 ) (60 ) 723 (13 )%
Non-residential CDOs 745 (30 ) (181 ) (48 ) 486 (35 )%
Agency residential asset-backed securities 505 - - (13 ) 492 (3 )%
Other   226     -       (28 )     9       207 (8 )%
Total (1) $ 18,036   $ (852 )   $ (882 )   $ (645 )   $ 15,657 (13 )%
 
(1) The September 26, 2008 net exposures include investment securities of approximately $140 million recorded in a non-U.S. Banks legal entity.
(2) Primarily represents losses on certain securities deemed to be other-than-temporarily impaired.
(3) The cumulative, pre-tax balance in OCI related to this portfolio was approximately negative $5.5 billion as of September 26, 2008.
(4) Primarily represents principal paydowns and sales.
                             
             

Net
exposures
as
of Jun.
27,
2008

 

 

Net
gains/(losses)
reported in
income

 

Other net
changes in net
exposures (1)

 

Net
exposures as
of Sep. 26,
2008

 

 

Net exposures
inclusive of
planned sales

 

3Q08 vs.
2Q08
Percent
Inc/(Dec)

 

3Q08 vs. 2Q08
Percent
Inc/(Dec)
inclusive of
planned
sales

Commercial Real Estate:
Whole Loans/Conduits $ 7,872 $ (838 ) $ (906 ) $ 6,128 $ 4,525 (22 )% (43 )%
Securities and Derivatives 575 (10 ) (10 ) 555 555 (3 )% (3 )%
Real Estate Investments (2)   6,454     (6 )     (312 )     6,136     6,136 (5 )% (5 )%
Total Commercial Real Estate, excluding First Republic Bank $ 14,901   $ (854 )   $ (1,228 )   $ 12,819   $ 11,216 (14 )% (25 )%
 
First Republic Bank $ 2,670   $ 22     $ 241     $ 2,933   $ 2,933 10 % 10 %
 
(1) Primarily represents sales, paydowns and foreign exchange revaluations.

(2) The Company makes equity and debt investments in entities whose underlying assets are real estate. The Company consolidates those entities in which we are the primary beneficiary in accordance with FIN No. 46-R, Consolidation of Variable Interest Entities (revised December 2003)—an interpretation of ARB No. 51.

The Company does not consider itself to have economic exposure to the total underlying assets in those entities. The amounts presented are the Company’s net investment and therefore exclude the amounts that have been consolidated but for which the Company does not consider itself to have economic exposure.

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Merrill Lynch & Co., Inc.         Attachment VIII
       
Revenue Reconciliation (Non-GAAP Measures)
(dollars in millions)
 

The following table provides the calculation of Merrill Lynch's net revenues excluding certain adjustments. While these amounts are considered non-GAAP measures, management believes that it is relevant in assessing the quality of our financial performance, identifying trends in our results and providing more meaningful period-to-period comparisons.

 
For the Three Months Ended Percent Inc / (Dec)

For the Nine
Months Ended

Sep. 26, Jun. 27, Sep. 28, 3Q08 vs. 3Q08 vs. Sep. 26, Sep. 28, Percent
  2008     2008     2007   2Q08 3Q07   2008     2007   Inc/(Dec)

GMI:

FICC

GAAP revenues, net of interest expense $ (9,943 ) $ (8,068 ) $ (5,764 ) $ (21,389 ) $ (718 )
Net losses / (gains) as follows:
U.S. ABS CDOs 4,836 3,492 6,855 9,800 6,956
Leveraged finance commitments write-downs 546 348 463 1,821 463
Residential mortgage-related exposures 2,289 1,255 1,027 4,326 1,646
U.S. Banks investment securities portfolio 852 1,673 143 2,946 101
Commercial real estate 832 15 - 794 (695 )
Other (1)   2,051     -     -     2,051     -  
Total net losses 11,406 6,783 8,488 21,738 8,471
 
Credit valuation adjustments ("CVA") related to
hedges with financial guarantors (2) 1,302 2,888 - 7,221 -
 
Net effect due to change in Merrill Lynch credit
spreads on certain long-term debt liabilities   (1,969 )   (98 )   (420 )   (3,446 )   (405 )
 
Adjusted revenues, net of interest expense 796 1,505 2,304 (47 )% (65 )% 4,124 7,348 (44 )%
 

Equity Markets

GAAP revenues, net of interest expense 6,030 1,727 1,581 9,640 6,115
Net losses / (gains) as follows:
Bloomberg sale (4,296 ) - - (4,296 ) -
Other   47     -     -     47     -  
Total net losses / (gains) (4,249 ) - - (4,249 ) -
 
CVA related to hedges with financial guarantors - - - - -
Net effect of Merrill Lynch credit spreads   (830 )   -     (174 )   (1,525 )   (208 )
Adjusted revenues, net of interest expense 951 1,727 1,407 (45 )% (32 )% 3,866 5,907 (35 )%
 

Investment Banking

GAAP revenues, net of interest expense 750 1,022 1,005 2,577 3,768
Net losses / (gains) - - - - -
CVA related to hedges with financial guarantors - - - - -
Net effect of Merrill Lynch credit spreads   -     -     -     -     -  
Adjusted revenues, net of interest expense 750 1,022 1,005 (27 )% (25 )% 2,577 3,768 (32 )%
 

Total GMI

GAAP revenues, net of interest expense (3,163 ) (5,319 ) (3,178 ) (9,172 ) 9,165
Net losses / (gains) 7,157 6,783 8,488 17,489 8,471
CVA related to hedges with financial guarantors (2) 1,302 2,888 - 7,221 -
Net effect of Merrill Lynch credit spreads   (2,799 )   (98 )   (594 )   (4,971 )   (613 )
Adjusted revenues, net of interest expense 2,497 4,254 4,716 (41 )% (47 )% 10,567 17,023 (38 )%
 

GWM

GAAP revenues, net of interest expense 3,235 3,359 3,538 10,193 10,426
Net losses / (gains) - - - - -
CVA related to hedges with financial guarantors - - - - -
Net effect of Merrill Lynch credit spreads   (44 )   7     (15 )   (66 )   (15 )
Adjusted revenues, net of interest expense 3,191 3,366 3,523 (5 )% (9 )% 10,127 10,411 (3 )%
 

Corporate

GAAP revenues, net of interest expense (56 ) (156 ) 20 (187 ) (149 )
Other net losses / (gains) 66 - - 66 -
CVA related to hedges with financial guarantors - - - - -
Net effect of Merrill Lynch credit spreads   -     -     -     -     -  
Adjusted revenues, net of interest expense 10 (156 ) 20 N/M N/M (121 ) (149 ) N/M
 

Total

GAAP revenues, net of interest expense 16 (2,116 ) 380 834 19,442
Net losses / (gains) 7,223 6,783 8,488 17,555 8,471
CVA related to hedges with financial guarantors (2) 1,302 2,888 - 7,221 -
Net effect of Merrill Lynch credit spreads   (2,843 )   (91 )   (609 )   (5,037 )   (628 )
Adjusted revenues, net of interest expense $ 5,698   $ 7,464   $ 8,259   (24 )% (31 )% $ 20,573   $ 27,285   (25 )%
                                   
N/M = Not Meaningful
(1) Primarily related to the default and spread movements of certain government sponsored entities and major U.S. broker-dealers.
(2) The CVA related to hedges with financial guarantors for the third quarter of 2008 is primarily related to the termination and potential settlement of monoline hedges.

CONTACT:
Media Relations:
Jessica Oppenheim, 212-449-2107
jessica_oppenheim@ml.com
OR
Investor Relations:
Sara Furber, 866-607-1234
investor_relations@ml.com

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