Fannie Mae takes $2.3 billion loss, slashes dividend
Continued credit problems pushed Fannie Mae to a $2.3 billion second-quarter loss, prompting it to cut its dividend to 5 cents a share, the company announced Friday.
Losses at Washington, D.C.-based Fannie Mae (NYSE: FNM), the largest buyer of home mortgages in the U.S., totaled $2.54 cents a share, while analysts polled by Thomson Financial were expecting losses of only 69 cents a share. Last year, the company posted a $1.83 billion profit, or $1.86 a share, in the second quarter.
Losses were driven largely by $5.3 billion the company spent on credit-related expenses, including $3.7 billion which was added to combined loss reserves. Fannie predicted 2008 will be the peak year for credit-related expenses.
"Our second-quarter results reflect challenging conditions in the housing and mortgage markets that began in 2006 and have deepened through 2007 and 2008," said Daniel Mudd, president and CEO in a statement. "We have already undertaken a series of initiatives, including raising more than $7 billion in additional capital in the second quarter, to help us manage through the most difficult U.S. housing market in more than 70 years."
While Fannie said it is well capitalized with $47 billion in the coffers, it announced a series of initiatives to conserve capital cashadvance.com fast cash online. By slashing its dividend to 5 cents a share from 35 cents a share, the company will preserve $1.9 billion in capital through 2009. It also will reduce its annual operating costs by 10 percent by the end of 2009 and increase its guarantee fees by a quarter of a percent, the company said.
Revenue at the mortgage giant was $4 billion, up 46 percent from 2007 and up 5 percent from the first quarter 2008.
Earlier this week, Fannie's government-sponsored rival Freddie Mac (NYSE: FRE) also posted higher than expected losses and cut its dividend to a 5 cents a share.