Freddie Mac (FRE) shares are on fire this morning, propelled by the company’s stronger-than-expected Q2 results, which were announced after the close on Friday.
The company posted Q2 net income of $768 million; after payment of $1.1 billion to the Treasury department for their senior preferred shares, loss per share was 11 cents. Freddie said it had a net worth at June 30 of $8.2 billion, and that no additional funding from the Treasury was required in Q2. The positive net worth includes a $5.1 billion increase reflecting the adoption of new accounting standards for security impairments.
It was the company’s first quarterly profit in two years.
Freddie said Q2 results were driven by $4.3 billion in net interest income, $4.2 billion in gains related to mark-to-market gains due to increases in long-term interest rates, $2.2 billion in net impairment of available for sale securities and a $5.2 billion provision for credit losses.
In a statement, Freddie Mac interim CEO John Koskinen said that the company is seeing early signs of a recovery in housing, with prices up modestly in some markets, but that Freddie Mac’s outlook is cautious due to rising foreclosures, growing unemployment, tight lending standards and buyer reluctance to re-enter the market.”
Nonetheless, FRE today is up 51 cents, or 68.9%, to $1.25.
Fannie Mae (FNM) shares are up 19 cents, or 28.4%, to 85 cents.
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