Jan. 30 (Bloomberg) -- Merrill Lynch & Co., the world's largest brokerage, will cut back on packaging home loans and consumer debts into securities after the collapse of the subprime mortgage market eroded demand for the products.
``Opportunities in many areas'' of structured finance and so-called collateralized debt obligations ``will be minimal for the foreseeable future and our activities will be reduced accordingly,'' New York-based Merrill said in an e-mailed statement. The firm will continue packaging corporate loans and derivatives into securities.
Merrill issued the statement after Chief Executive Officer John Thain told investors at a conference in New York earlier today that the firm planned to exit its CDO and structured credit businesses. Jessica Oppenheim, a spokeswoman for the company, said the statement was released to clarify Thain's remarks. She declined to elaborate on the statement.
``We are not going to be in the CDO and structured-credit types of businesses,'' which generated 15 percent of the firm's fixed-income revenue, Thain said at the conference.
Merrill posted its largest-ever loss last year after writing down the value of its CDOs and other assets related to subprime mortgages by more than $24 billion. The New York-based bank was the biggest underwriter of CDOs from 2004 through 2006, and got stuck with some of the products as investor demand declined.
The market for CDOs, which repackage assets into new securities with varying degrees of risk, has been frozen since last July when two Bear Stearns Cos. funds that invested in them collapsed. Merrill Lynch will focus on improving its rankings on stock and bond underwriting league tables instead, Thain said.
``There's no reason we shouldn't be able to capture a bigger slice of the investment-banking fee pie,'' Thain said. ``We should be top three as opposed to top five.''
Merrill fell 67 cents, or 1.2 percent, to $56.80 at 2:01 p.m. in New York Stock Exchange composite trading. The shares have gained about 6 percent this year.
The company reported a fourth-quarter net loss of $9.83 billion, or $12.01 a share, on Jan. 17, as losses in the fixed- income division wiped out all revenue at the firm's investment bank and retail brokerage.
Thain told investors on a Jan. 17 conference call that the firm's remaining CDOs were valued ``conservatively'' and ``don't have much more downside.'' Merrill plans to liquidate the holdings possibly by selling them to hedge funds and other investors that are pooling money to buy securities at distressed prices, he said.