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BUSINESS NEWS JAN 18, 2008
Due to a technical problem on Wednesday Jan 16, we are upgrading the news management system which will be completed in coming days.

Business News Headlines to Jan 16 2008

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Jan 18 2008 News Links

Average weekly earnings in Irish distribution and business services were up by 4.2 % in September 2007

European Central Bank reports tightening in Eurozone bank lending in the fourth quarter of 2007

Markets News Friday: Shares of leading US bond insurer plunges 51% triggering fears of deepening in credit crisis

Trichet says underlying Eurozone productivity trends are a “disgrace”

Japanese consumer confidence plunges to more than four year low

Friday Newspaper Review - Irish Business News and International Stories

China becomes world's top Gold producer ending South African dominance dating from 1905

Friday Newspaper Review - Irish Business News and International Stories
Principal news stories from the Irish Times, Irish Examiner, Financial Times and New York Times.

The Irish Independent reports that up to 1,500 jobs may be lost at SR Technics Ireland, the company formerly known as Team Aer Lingus, if it loses a key maintenance contract with the airline.

According to an SR Technics document presented to staff representatives last week, the Aer Lingus preference is to take the key routine maintenance contract in-house, in which case the Irish operation would be closed with the loss of 1,200 full-time jobs and a further 300 associated positions.

In the past month Aer Lingus has decided to award two of the four maintenance contracts, one for brakes and wheels, and one for components, to other companies.

Over the past two days the airline has been in intensive discussions with maintenance firms hoping to win the contract for the general overhaul of planes. A decision on that contract is expected later today.

The key contract for SR Technics relates to the routine maintenance, or "line maintenance" of the Aer Lingus fleet. This contract is expected to be decided on next week.

In a presentation to trade union representatives, the company described its Irish profitability as "marginal".

SR Technics bosses said: "We understand that the Aer Lingus preference may be to insource the line maintenance activity. This would give rise to significant industrial relations issues affecting both companies."

Closure of the company (SR Technics Ireland) is the likely scenario in the case where the contract is lost, warned management.

Siptu met with Transport Minister Noel Dempsey yesterday and expressed its concern that Aer Lingus, which is partly state-owned, was jeopardising the future of SR Technics in Ireland.

Irish and European law prohibits any intervention by the Government and it is understood this was communicated to the union.

Nevertheless, the prospect of the closure of SR Technics at Dublin Airport is bound to cause uneasiness for the Government. As with Aer Lingus's decision to exit Shannon, it is likely to draw attention to the Government's decision to privatise the airline.

Politicians will also recall how political turmoil engulfed Aer Lingus's original decision to establish its maintenance operations as a separate subsidiary in 1990.

That row was only resolved when the then transport minister Seamus Brennan gave "letters of comfort" to the 1,500 Team Aer Lingus employees guaranteeing that their jobs were secure.

When Aer Lingus sold Team Aer Lingus to SR Technics -- then known as FLS Aerospace -- in 1997, FLS was forced to spend €70m buying out these letters of comfort.

Siptu president Jack O'Connor said the trade union may insist the letters be honoured.

He said: "If people are in possession of letters of comfort and their employment is in jeopardy, that is an issue which will have to be resolved. He also said the union may resort to legal action in the event that Aer Lingus does take the line maintenance contract in-house, to force the airline to re-employ the SR Technics staff.

"We view it (the SR Technics contract) as an undertaking," he said.

The Irish Independent also reports that the European Commission is planning to clamp down on the way mobile phone companies charge their customers after the body found that users are often charged 20pc more than the actual time of their calls because they are charged by the minute.

The move follows a decision by the commission to target mobile operators on roaming rates last year.

The commission said it was concerned about the per-minute charges.

"The commission is concerned that customers are being charged on a per-minute basis instead of the actual time of the call," it said in a statement. "The difference between billed and actual minutes appears to be typically about 20pc."

For example, it said that although a customer may stay on a call for only 20 seconds, the user could be charged for a full minute.

It said it would investigate matters more closely in a report due at the end of the year, which will also focus on the cost of text messages and international data services.

EU Telecommunications Commissioner Viviane Reding has raised the prospect of setting caps on text messages and data services if her calls to cut costs are not answered.

Concerned

"I remain concerned about prices for SMS (text messages) and data roaming services," she said. "We will watch developments very closely and respond appropriately by the end of 2008."

In terms of prices, EU regulatory intervention has focused on roaming charges, capped at EU level since last year. The use of mobile phones abroad now has a maximum charge of €0.30 per minute. In addition, the commission launched a wide-ranging review of the whole telecoms sector in November 2007, following the liberalisation wave of the last two decades.

According to the latest Eurostat data for 2004, the EU telecommunications sector is made up of around 24,000 enterprises, with a turnover of €398.6bn and added value amounting to €187.2bn.

The Irish Times reports that shares in electronic payments group Payzone were suspended in London yesterday until High Court proceedings involving the company and its chief executive John Nagle and chief financial officer John Williamson have concluded.

It was claimed in the High Court yesterday that Payzone chairman Bob Thian and other non-executive directors of the company had engaged in a "conspiracy" to secure the removal of Mr Nagle and Mr Williamson.

The company said it would defend the case but needed until today to prepare its reply to the claims made.

Justice Mary Laffoy was asked to grant what is called a "Fennelly order", which would have resulted in the two executives continuing to be paid but only being allowed to carry out limited duties. This request was rejected.

Payzone was created on December 5th following the merger of Irish e-payments group Alphyra, which Mr Nagle founded, and UK ATM operator Cardpoint, which was led by Mr Thian.

On Wednesday, Payzone issued a statement to the stock exchange saying that Mr Nagle and Mr Williamson had left the company.

Later that day, the two executives secured court injunctions preventing Payzone from removing them from their positions.

This order was continued until today, when the court proceedings are due to resume.

While he had not, to date, been physically excluded from the company's premises, Mr Nagle said he feared an effort would be made to do so unless the defendant was restrained by the court.

It is understood that Mr Nagle spent time at Payzone's head office in Sandyford yesterday.

In an affidavit, Mr Nagle claimed that Mr Thian was pursuing "a personal agenda" to deflect attention from the underperformance of Cardpoint and to "transfer blame" to Mr Williamson and Mr Nagle.

Sources close to Mr Thian maintained that the decision to remove Mr Nagle and Mr Williamson was unanimously supported by other board members and directors and by the majority shareholder, Balderton Capital.

Balderton owns 40.5 per cent of Payzone's shares and on Wednesday agreed not to sell the stock into the market for at least six months.

Both executives are seeking orders for damages for alleged conspiracy by Mr Thian and other non-executive directors of Payzone, most of whom are non-executive UK directors nominated by Cardpoint.

Mr Nagle said the members of the board had acted in flagrant contravention of the constitutional documents of the company and his contract, and with "utter disregard" for his reputation.

Mr Nagle said he "utterly rejected" that the company has any "real or serious" concerns about his management of Payzone's affairs. Paul Gardiner SC, who is representing the two executives, said the company had breached the men's contracts.

He also argued that the board meeting at which they were dismissed was not properly convened.

The Irish Times also reports that Tesco chief Sir Terry Leahy says the economic slowdown will not curtail the rapid expansion in Ireland of the supermarket chain, whose annual sales in the current fiscal year are likely to come in at around €3 billion.

Despite the downturn, Tesco plans to open a further 10 outlets this year.

The group opened five stores last year, which brought the total number of outlets to 100. It operates filling stations on sites adjacent to 12 of its stores.

In an interview in Business This Week, Sir Terry said he was unperturbed by the Government's analysis that the economy has passed a "turning point" with slower growth on the cards in the period to 2011.

"A lot of what we sell is basic stuff. So we never hit the highs but we don't suffer from the lows," he said.

The group plans to open supermarkets this year in Kilrush, Co Clare; Tullow, Co Carlow; Birr, Co Offaly; Bailieborough, Co Cavan; Bettystown, Co Meath; and Cashel, Co Tipperary.

It plans to open four Express convenience stores in Dublin, at Parnell Street, Camden Street, Ringsend and Inchicore.

These openings will add some 250,000 sq ft to Tesco's footprint in Ireland, a little less than the 270,000 sq ft it has added to its total in the current fiscal year.

The chain also officially commissioned its first instore combined heat and power generation unit in Ireland yesterday as part of its environmental strategy to reduce carbon emissions and energy bills.

Sir Terry will tonight receive the Sean Lemass Gold Medal for Business Leadership from Trinity College Dublin and the Irish Management Institute in recognition of his business achievements and Irish roots.

Tesco achieved sales in Ireland of €2.7 billion in the year to February 2007, 9.7 per cent ahead of the previous year.

Sales growth in the six months to August last year was 8 per cent, down from 11 per cent a year earlier.

Sir Terry declined to put a figure on its likely sales for the full year.

"The business is growing along fine. I think growing sales of 8 or 9 per cent in an economy that's growing at 4 or 5 is a good performance but it's not an extraordinary performance," Sir Terry said.

The group does not disclose the profitability of its Irish operation. Sir Terry would not say whether its operating profit margin here was greater or lower than the 4.7 per cent Tesco declared for its European division in its most recent interim results.

He said he was confident, notwithstanding the downturn, that Tesco will open further stores in Ireland "because there's a lot of catch-up in the physical infrastructure" of the supermarket sector.

The Irish Examiner reports that O’Briens sandwich bars will open 15 new stores in Ireland this year, following its first step into the Canadian market.

The first O’Briens store in Canada opened this week and is based in Toronto.

It is operated by husband and wife team, Meryem and Manny Singh, who took out a master franchise on the business.

It is expected that turnover at the store will be as much as €340,000 this year.

The Singhs are also planning to expand into Ontario and British Columbia.

Mr Singh said: “We firmly believe that the O’Briens concept and product range will prove very attractive to Canadians.

“We are very excited about launching such a strong brand into Canada.”


He added that products at the Toronto store have been sourced locally, including Guinness Mustard, which is being hand-made exclusively for them by a company in Ottawa.

The store initially opened with 12 people, including a store manager, with plans to add to this as the business expands, especially on the catering side.

Chief executive of O’Briens, Fiacra Nagle, said: “While we continually look at international growth based around countries where we already do business, it is exciting for us to be launching into Canada. We are also extremely excited about the launch of the largest O’Briens in the world in Belfast later this year.”

O’Briens have yet to launch in the US despite successfully launching in Australia, China and South Africa.

This year it has plans for 15 new stores in Ireland, with the largest being the Belfast store.

The O’Briens franchise, which was established in 1995 in Dublin, has achieved global success, having grown to more than 300 stores in 13 countries. The franchising business generated a group turnover of more than €100 million in 2006.

The Financial Times reports that fears that the credit crunch might be entering a traumatic new phase grew on Thursday as investors lost confidence in the insurers that guarantee payments on billions of dollars in bonds.

Shares in Ambac Financial and MBIA, the world’s biggest bond insurers, fell 52 per cent and 31 per cent, respectively, as Moody’s Investors’ Service raised the possibility that both might lose the triple-A credit rating on which they depend.

The sector was dealt another blow when Merrill Lynch said it was writing down $3.1bn in hedges with bond insurers, mostly with ACA Capital, a guarantor that has lost its investment-grade rating and needs to raise $1.7bn by on Friday to avoid insolvency.

The triple-A credit rating of the bigger bond insurers is crucial because any demotion could lead to downgrades of the $2,400bn of municipal and structured bonds they guarantee.

This could force banks to increase the amount of capital held against bonds and hedges with bond insurers – a worrying prospect at a time when lenders such as Citigroup and Merrill are scrambling to raise capital.

“Significant changes in counterparty strengths [of bond insurers] could lead to systemic issues,” said Eileen Fahey, managing director at Fitch Ratings.

The crisis of confidence in MBIA and Ambac has been building because of their exposure to securities backed by assets including subprime mortgages. Warren Buffett’s Berkshire Hathaway set up a new bond insurer last month after New York state’s insurance regulator pressed him to do so.

The pressure on the traditional bond insurers rose on Wednesday when Ambac said it planned to raise $1bn in equity. Just hours later, Moody’s said it was putting Ambac’s triple-A rating on review for a downgrade.

On Thursday, Moody’s said MBIA’s triple-A rating could also be cut, including ratings of $1bn worth of capital that it raised just last week.

Standard & Poor’s said on Thursday that losses for bond insurers could be 20 per cent higher than previous estimates, raising expectations that it, too, might consider lowering its triple-A credit ratings for Ambac and MBIA.

The fresh credit concerns pushed up the cost of buying protection against a possible default by MBIA or Ambac.

“The debt and the equity markets now both regard these companies as no longer being triple-A,” said Andrew Wessel, an analyst at JPMorgan.

“Their ability to continue to insure new bonds, which is their sole function, has effectively been diminished by the market.”

The cost of buying protection against defaults by US companies also rose. The Markit CDX North America investment grade index rose 9.5 basis points to a record 111bp, indicating increased concerns about the chances of defaults. The index gauges credit risk and has risen from under 80bp since the start of the month.

Jamie Dimon, chief executive of JPMorgan, said this week when asked about bond insurers: “What [worries me] is if one of these entities doesn’t make it . . . the secondary effect . . . I think could be pretty terrible.”

The FT also reports that a plan to increase the use of biofuels in Europe, to be outlined next week, may do nothing to help fight climate change and incur costs that outweigh the benefits, says an internal European Union report.

The unpublished study by the Joint Research Centre, the European Commission’s in-house scientific institute, was prepared ahead of the commission’s meeting next Wednesday when it is set to endorse plans for biofuels to account for 10 per cent of transport fuels in the 27-member EU by 2020.

“The costs [of the target] will almost certainly outweigh the benefits,” says the report, a copy of which has been obtained by the Financial Times. Taxpayers would face a bill of €33bn-€65bn between now and 2020, the study says.

“The uncertainty is too great to say whether the EU 10 per cent biofuel target will save greenhouse gas or not,” it adds.

EU leaders called for the target last year as part of a move to cut greenhouse gas emissions by 20 per cent of 1990 levels by 2020.

However, some commissioners have expressed concerns about the knock-on effects of using plants for fuel. Indonesia has seen large street protests this week over record soyabean prices triggered by US farmers opting to grow corn to supply the biofuel industry over soyabeans.

Green groups are also concerned that forests could be cleared for food crops displaced by biofuel plantations, although the commission says it would introduce measures to avoid this. Corn and palm oil are among the most popular biofuel sources, though sugar from Brazil is considered the most “green” by the JRC as it grows quickly and produces a lot of energy.

A commission spokeswoman said the JRC report had not been peer-reviewed. She said: “It is a contribution to the debate, we are looking at the whole picture and we will have sustainability criteria.”

The JRC suggests that it would be more efficient to use biofuel to generate power rather than fuel cars. It also suggests that the separate transport target be scrapped. It is even doubtful about the merits of using plant waste, such as straw, since transporting large quantities to biofuel factories itself requires fuel.

Adrian Bebb, of Friends of the Earth, said: “The report has a damning verdict on the EU policy. It should be abandoned in favour of real solutions to climate change.”

The New York Times reports that the stock market plunged again on Thursday on bad economic news, taking little comfort from reassuring words by the chairman of the Federal Reserve or an emerging consensus about a stimulus plan that many worry could be too late.

On a day when stocks were pushed down another 3 percent on reports of more weakness in housing and manufacturing — bringing the decline this year to a stomach-churning 9 percent — all the major players in Washington agreed on the need for putting extra money into people’s hands quickly.

President Bush publicly confirmed for the first time that he would propose a package of emergency measures, outlining its basic principles on Friday, in an effort to restore the eroding confidence of investors and consumers. The package is expected to include more than $100 billion in one-time tax rebates for individuals and an opportunity for businesses to rapidly write off their capital investments.

In a rare sign of his willingness to cut a deal with Democrats in Congress, White House officials said Mr. Bush would not demand that the stimulus package include provisions that permanently extend his signature tax cuts from 2001 and 2003.

In a conference call with Democratic leaders on Thursday afternoon, Mr. Bush signaled his eagerness to reach agreement. “I think there was a collective sense that there was no reason why we can’t get something done quickly,” said Tony Fratto, the White House deputy press secretary. “I think that was a unanimous feeling on the call.”

Despite the rising prospect of a fiscal pump-priming effort from Washington, investors on Wall Street remained in a black mood as data showed that the housing debacle was getting worse and beginning to bring down the rest of the economy.

The Dow Jones industrial average turned down even as the Fed chairman, Ben S. Bernanke, began to deliver his widely anticipated testimony to the House Budget Committee. By the end of the day, the Dow had plunged 307 points; the fall since Jan. 1 is now 9.2 percent. Wall Street started the day with Merrill Lynch reporting that it lost $9.8 billion in the fourth quarter, mainly because of booking $15 billion in losses tied to soured home loans.

Adding to the pessimism, which drowned out the reassurances by Mr. Bernanke that a recession could be averted, were reports that manufacturing activity could be slowing even more than analysts had expected, and that housing starts dropped 14 percent last month and reached their lowest level in 16 years.

Mr. Bernanke insisted that despite concerns about “slowing growth,” the economy remained “extraordinarily resilient.”

“It has a strong labor force, excellent productivity and technology and a deep and liquid financial market that is in the process of trying to repair itself,” Mr. Bernanke said. “So I think we need to keep in mind also that the economy does have inherent strengths and that those will certainly surface over a period of time.”

But James W. Paulsen, a strategist at Wells Capital Management, reflected the view of many investors that help from Washington would come too late.

“By the time they actually pass anything, it will be past the time we need it,” Mr. Paulsen said.

Democratic leaders said they were hopeful about reaching a deal in a few days, but they could end up feuding with Mr. Bush over who should benefit most from the stimulus measures.

Democrats are drafting a package that would cost about $100 billion and is likely to include one-time tax rebates for workers, expanded unemployment benefits and other measures aimed at middle-income and low-income people who are most likely to spend any extra money immediately.

Mr. Bush and many Republican lawmakers have argued that any stimulus measure has to include incentives for businesses to spur job creation. But after speaking with the president by telephone, Democratic leaders said they were optimistic about reaching agreement.

“The acknowledgment by the president today of the immediate need for a stimulus package is significant progress,” said the House speaker, Nancy Pelosi of California, after the call. “In the next few days, through bipartisan negotiations, we are hopeful that we will agree on legislation that provides timely, targeted and temporary assistance.”

To be sure, there was grumbling. The Senate majority leader, Harry Reid of Nevada, was irritated that Mr. Bush had abruptly decided to outline a plan on his own instead of developing a bipartisan package with Democrats. “The President’s strategy threatens to unnecessarily politicize the inevitable bipartisan negotiations we will need to quickly enact legislation,” Mr. Reid complained.

Mr. Bernanke refused to endorse any specific measures, but he said the key to success would be to act fast and to focus on temporary measures that get extra money into the hands of people within the next 12 months. To do that, he added, Congress would have to pass legislation within the next month or two.

“In order for this to be useful, you would need to act quickly,” Mr. Bernanke told the committee on Thursday morning. “Stimulus that comes too late will not help support economic activity in the near term, and it could be actively destabilizing.”

Despite repeated entreaties from Republican lawmakers, Mr. Bernanke refused to endorse calls for making the president’s tax cuts permanent rather than letting them expire at the end of 2010.

Whatever the merits of that move might be, he told lawmakers, the Bush tax cuts were a matter of long-term fiscal policy that should not be entangled with a short-term stimulus program.

Until Thursday, administration officials and many Republican lawmakers had made it clear that making Mr. Bush’s tax cuts permanent would be a priority for his last year in office. Those cuts include rate reductions for people at every income level and sharply lower tax rates on investment income.

Democratic leaders have been adamantly opposed to any such move, and most of the Democratic presidential candidates have called for rolling back the tax cuts at least for families that earn more than about $200,000 a year. But Democrats had worried that Republicans might try to hold a stimulus bill hostage to their demands on the Bush tax cuts.

Mr. Fratto, the president’s deputy press secretary, said Mr. Bush was as determined as ever to make his tax cuts permanent before he leaves office. But he said the issue of a short-term stimulus is a separate matter.

“The president supports a permanent extension of his tax cuts, and he supports a short-term growth package, but they are separate,” Mr. Fratto said.

For economists and for the Federal Reserve, the big question is which tax cuts or spending measures will produce the biggest and fastest jolt to economic activity.

Most economists agree that tax rebates are one of the fastest ways to lift consumer spending. They also agree that stimulus measures are most efficient when aimed at low-income or middle-income people, because they are more likely than affluent people to spend any extra money rather than save it.

According to estimates several years ago by Mark Zandi, chief economist of Moody’s Economy.com, the measures that produced the biggest “bang for the buck” were increases in unemployment benefits, which produced about $1.73 in additional demand for every dollar spent. Tax rebates to all citizens generated about $1.19 for every dollar spent, while reductions in tax rates produced only 59 cents per dollar.

But other economists argue that temporary incentives for business investment have a powerful effect as well.

Bloomberg News, citing people who insisted on anonymity, reported that the White House is likely to propose an $800 tax rebate for individuals, a $1,600 rebate for households and investment incentives for businesses.

Mr. Bernanke told members of the committee on Thursday that even $100 billion would have a significant impact.

The NYT also reports that the outlook darkened for Merrill Lynch on Thursday as news of a huge quarterly loss sent the company’s stock plummeting.

Merrill, the nation’s largest brokerage firm, posted a $9.8 billion fourth-quarter loss, almost matching the deficit reported for the period by Citigroup, a company three times Merrill’s size. The loss at Merrill, which exceeded analysts’ forecasts, reflected $16.7 billion of write-downs on mortgage-related investments and leveraged loans.

Merrill’s results helped touch off a steep decline in the stock market and raised concern that the firm might face further losses in the months ahead.

John A. Thain, who took over as chief executive in December, called the loss “unacceptable” but said the company had enough capital after raising $12.8 billion from foreign and domestic investors this week.

“We’re very confident that we have the capital base now that we need to go forward in 2008,” Mr. Thain said.

Investors did not share his confidence. Merrill’s stock fell more than 10 percent, to $49.45 a share, as the broader market took its biggest tumble since November.

Analysts said they were concerned that Merrill was still exposed to the various areas of the troubled mortgage market. They also said Merrill’s weakened finances and the foreboding economic environment would hamper many parts of the firm’s business.

“There is still a lot of uncertainty ahead for Merrill,” said Brad Hintz, a securities analyst at Sanford C. Bernstein & Company. “I suspect John Thain has no choice but to constrain the trading business pretty tightly.”

Mr. Thain highlighted the positive elements of Merrill’s results, including record results in equity capital markets, investment banking and global wealth management. “The vast majority of our businesses did really, really well,” he said in an interview.

But Mr. Thain expressed some dismay at the risks Merrill took before he joined the firm. “They shouldn’t be taking risks that wipe out the earnings of the entire firm,” he said, referring to the fixed-income trading desk, many of whose executives have been fired.

Investors seemed to agree. “As painful as it is, we are glad that Merrill acted as aggressively as it did on both the capital raising and the write-downs,” said William Tanona, an analyst at Goldman Sachs. “Nonetheless, it is disheartening to know that the firm wiped out about four years of book value growth in one quarter.” In 2002-6, Merrill Lynch earned $22.6 billion in profits.

Mr. Thain has moved quickly to build the firm’s liquidity and capital. He has also flattened the firm’s reporting structure to “reduce the siloing that has taken place at Merrill Lynch over the last few years,” he said.

Picking up the pieces is nothing new for Mr. Thain. In his previous job as chief of the New York Stock Exchange, now NYSE Euronext, Mr. Thain had to deal with the fallout over the ouster of the former chairman, Richard A. Grasso, whose $139.5 million pay package had caused a furor at the nonprofit institution. Mr. Thain then fundamentally changed the way the exchange functioned, taking it public, accelerating automation and ultimately merging the exchange with a giant European board.

He arrived at Merrill amid a storm of controversy surrounding E. Stanley O’Neal, the polarizing former chief executive. Mr. O’Neal had pushed Merrill into more aggressive areas — a strategy that was successful until the subprime market collapsed.

Mr. Thain has since moved quickly to improve risk management and unify executives. He hired Nelson Chai as the new chief financial officer. And after releasing earnings on Thursday, the firm announced the appointment of Noel B. Donohoe to lead the risk department with Edmond N. Moriarty. Mr. Thain instituted a weekly risk meeting at which the business heads would report to him. “What’s important is that the risk heads report directly to me and that the meeting is with the business leaders and it’s a discussion about the risk across the firm,” he said.

Merrill losses included a $9.9 billion write-down on collateralized debt obligations, a $1.6 billion write-down on subprime mortgages and a $3.1 billion write-down on exposure to bond insurers, which have come under tremendous pressure for insuring securities that are defaulting a record rates. Other areas for write-downs include $900 million in Alt-A and residential mortgages outside the United States and $230 million related to the company’s $18 billion commercial real estate portfolio. Mr. Thain said he did not expect to recover any money on C.D.O.’s.

By way of comparison, Citigroup wrote down $23.2 billion in mortgage-related losses and provisions for future bad loans while also reporting a $9.83 billion fourth-quarter loss. The bank raised $19.1 billion from sovereign wealth funds and domestic investors.

While investors shed Merrill stock on Thursday, Mr. Thain expressed confidence in the prospects for his firm and the broader economy. He said that although the economy is likely to slow, it is unlikely to sink into a recession. He outlined growth initiatives, including expanding the global wealth management business abroad and expanding all the company’s businesses in the Pacific Rim, especially in China. He also predicted the firm could get back to a return on equity — a measure of profitability — of 20 percent.

Not all analysts agreed with that projection. “I’m skeptical,” said Mr. Hintz of Sanford Bernstein.

“The good thing was John Thain and company said everything I wanted them to say. He was on top of the situation and taking the right steps,” said Jeffrey Harte, an analyst at Sandler O’Neill & Partners. “The bad news is they have a big job in front of them,” he said, adding that the firm still had sizable exposures to some of the most toxic assets in the marketplace.

For his part, Mr. Thain appears to enjoy the job. He praised the company’s culture, and he was quick with an answer as to how that culture differed from that of Goldman Sachs, where he built his career. “The biggest single difference is the focus on clients,” he said. “Merrill does truly put clients first.”

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