Merrill Lynch & Co., the world's largest brokerage, lost nearly $10 billion US in the last three months of 2007, its biggest quarterly loss since it was founded 94 years ago, after writing down $14.6 billion US of investments slammed by the ongoing credit crisis.

Shares of Merrill fell more than 10 per cent, giving up $5.64 US to end at $49.45 US on the NYSE.

Merrill Lynch 3-month NYSE chart

Merrill Lynch became the third of the five biggest Wall Street investment banks to post a loss for the quarter after taking massive writeoffs related to the shrinking value of securities backed by mortgages that have soured as borrowers have been unable to make payments on time.

The loss reported Thursday slightly exceeded the deficit posted for the same quarter earlier in the week by the nation's largest bank, Citigroup Inc., the largest deficit in its 196-year history.

The huge housing-driven shortfalls come as weak economic data have intensified fears of a recession, and have increased pressure on the government for an economic stimulus plan.

Merrill Lynch posted a net loss after preferred dividends of $9.91 billion US, or $12.01 US per share, compared to a profit of $2.3 billion US, or $2.41 US per share, a year earlier.

Wall Street analysts had been forecasting a loss of $4.93 US per share, according to Thomson Financial. However, they have not been able to make accurate projections since the summer, when investment banks began taking large writedowns and boosting reserves due to the collapse of the subprime mortgage market.

The New York-based brokerage marked down $11.5 billion US from mortgage-backed securities, and an additional $3.1 billion US in adjustments to hedge positions on them.

"While the firm's earnings performance for the year is clearly unacceptable, over the last few weeks we have substantially strengthened the firm's liquidity and balance sheet," John A. Thain, Merrill's new chair and chief executive, said in a statement.

Merrill Lynch secured almost $13 billion US worth of fresh capital, mostly from foreign wealth funds in Singapore, Korea and Kuwait.

Thain also addressed the balance-sheet woes by selling a commercial-finance unit.