Magazine article American Banker

Freddie Outpaced Estimates in 'Nice, Quiet, Solid' Quarter

Magazine article American Banker

Freddie Outpaced Estimates in 'Nice, Quiet, Solid' Quarter

Article excerpt

Freddie Mac on Tuesday beat the analysts' consensus by a penny, announcing second-quarter earnings of 84 cents a share. Its net income of $631 million was up 14% over the same period last year.

Freddie's report looked especially strong coming a week after its bigger rival, Fannie Mae, reported earnings that hit the Wall Street consensus but included special items that created some investor confusion.

"It looks like a nice, quiet, solid quarter," said Kenneth A. Posner, an analyst with Morgan Stanley Dean Witter. "The business models for Fannie and Freddie are continuing to hum along and produce good growth and good margins."

Freddie's second-quarter income was up 3% from the first quarter's $608 million, or 81 cents per share. In the fourth quarter of last year, Freddie reported a net income of $594 million.

Thomas O'Donnell, an analyst with Salomon Smith Barney, said the quarter's biggest surprise was a lack of surprises. "It was a solid quarter, actually a ho-hum quarter," and that's just what investors want, he said.

Freddie's total revenues reached $1.107 billion, with net interest income totaling $696 million, and management and guarantee fee income ringing in at $368 million. Other income totaled $43 million.

Howard L. Shapiro, an analyst with Goldman Sachs, said the earnings report came in as expected in most areas, though credit quality and delinquency rates were a positive surprise. Credit costs and delinquency rates continue to fall for both Fannie and Freddie, he said.

"What that tells me is credit is not going to be a concern for probably the next two years, almost by definition," Mr. …

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