Freddie Mac on Wednesday posted its fourth consecutive quarterly loss, set plans to slash its common stock dividend and doubled its reserves for losses on delinquent loans and home foreclosures.
Just three weeks after U.S. authorities orchestrated a sweeping effort to prop up the second-biggest provider of U.S. residential mortgage funding and its rival Fannie Mae, Freddie Mac affirmed a commitment to raise $5.5 billion in fresh capital.
It provided no immediate details of its capital plan but repeated that it continues to maintain a surplus over regulatory capital requirements.
For the second quarter, McLean, Va.-based Freddie Mac reported a loss of $821 million, or $1.63 cents per share, compared with a profit of $729 million, or 96 cents per share, a year earlier.
That included a significant loss from its holdings of subprime and other risky loans, which formed a big part of its $2.8 billion in realized and anticipated losses stemming from the steepest U.S. housing downturn since the Great Depression.
"Credit-related expenses were far higher than what guidance had been," said Rajiv Setia, a strategist at Barclays Capital in New York.
The second-quarter loss follows a $151 million loss in the first quarter, and brings its cumulative loss over the past four quarters to more than $4.6 billion.
To help preserve capital, Freddie Mac said it would slash its quarterly dividend, pending board approval, by at least 80 percent to 5 cents a share or less from 25 cents a share. On an annualized basis, that will save Freddie Mac more than $500 million based on current shares outstanding.
Freddie Mac, along with its larger rival Fannie Mae, owns or guarantees more than $5 trillion in mortgages, or nearly half of all U.S. home loans.
Freddie said revenue rose by more than 10 percent from the first quarter to $1.69 billion, including a increase of 92 percent in net interest income to $1.5 billion.
But the company more than doubled its provisions for loan losses to $2.5 billion since the end of the first quarter. All credit-related expenses surged to $2.8 billion in the quarter from $1.4 billion in the previous quarter and $463 million a year earlier.
Total credit losses rose to $810 million from $528 million in the first quarter.
(Reuters)