CORRECTED-UPDATE 4-Merrill posts $4.9 bln loss, sells Bloomberg

By Elinor Comlay

NEW YORK (Reuters) - Merrill Lynch & Co (MER.N: Quote, Profile, Research) posted a much larger-than-expected $4.89 billion quarterly loss on Thursday after writing down soured debt, and unveiled plans to sell billions of dollars of assets -- including a part of its lucrative brokerage business -- to shore up capital.

The loss was the fourth straight for Wall Street's third-largest investment bank, and was more than twice as big as analysts expected. Chief Executive John Thain called the quarter "difficult and disappointing."

Thain joined Merrill in November to turn around a company that had been rocked by massive write-downs of complex debt securities. But so far this year, the company has racked up more than $7 billion of net losses for common shareholders, as bad investment and business decisions made under ousted former chief executive Stanley O'Neal have haunted Thain.

"They're moving in the right direction but Merrill still has significant challenges, including material exposure to collateralized debt obligations," said Chris Armbruster, an analyst at Al Frank Asset Management, which holds 24,000 Merrill shares. "We like the company, but it's going to be a tough go."

Merrill's shares fell $1.83, or 6 percent, to $28.90 in after-hours trading.

Merrill's shares had risen $2.73, or 9.8 percent, during the day after JPMorgan Chase & Co (JPM.N: Quote, Profile, Research) posted better-than-expected second-quarter earnings and triggered a broader financial rally. But Merrill's losses may dampen optimism in the financial sector, a day before Citigroup Inc (C.N: Quote, Profile, Research) posts results.

Merrill said it is in discussions to sell a controlling stake in its Financial Data Services Inc unit, which provides mutual fund administrative services and retail banking products, to an undisclosed party in a transaction valuing the unit at more than $3.5 billion. The unit is part of Merrill's brokerage business.

It also said it has completed and is helping finance the long-expected sale of its 20 percent stake in Bloomberg LP, the news and financial data company, to Bloomberg Inc for $4.43 billion.