Mudd’y Outlook for Fannie Mae
Originally Published In the News May 6, 2008 1:55 PM
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Capital injections into financials are far from over, as evidenced by news from Fannie Mae, which will mark one of largest injections yet:
Fannie Mae (NYSE:FNM) , the largest buyer of mortgages in the US, on Tuesday reported a first-quarter loss of $2.2bn and said it would seek $6bn in new capital as the deteriorating housing market extracted a heavy toll.
Fannie posted credit loss provisions of $3.1bn and swung to a loss of $2.57 a share as home delinquencies and foreclosures rose. This was in sharp contrast with a $961m or 85 cents a share profit for the first quarter a year ago. Credit losses were $249m a year ago.
Daniel Mudd, the government-sponsored company’s chief executive officer, made clear that difficult market conditions would continue. “Right now we are in the belly of the cycle,” he said, adding that 2008 and 2009 will be tough years.
The stock is in stronger hands today than it was several months ago, and perhaps investors have gotten comfortable with bad news and dilution. The stock is leading a rally this afternoon, and bears might want to stop looking in the rear view mirror to buttress their arguments that this tape is heading lower.
This battleground has been raging for months; it has largely been a stalemate but each passing day brings the bulls closer to victory.
That is the script, in any case.
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