Tuesday May 6, 04:33 PM
Fannie Mae erases early loss to trade higher on heavy volume
NEW YORK (Thomson Financial) - Shares of Fannie Mae (NYSE: FNM - news) reversed course to trade sharply higher on heavy volume Tuesday, after investors digested the government sponsored mortgage company's announcement of a $6 billion capital raise and a $2.2 billion quarterly loss.
The stock was last up 3.8% at $29.35 on volume of 33.3 million shares, which is already a little more than double the full-day average over the past 30 days of 16.9 million shares. The stock is now up 35% over the last 2 months, but is still down 27% since the end of 2007.
Earlier in the session, the stock was down as much as 7.2% at the intraday low of $26.24.
Fox-Pitt Kelton Analyst Howard Shapiro said the company's capital raise was 'as expected,' while net interest income was 'significantly better' than he forecasted because of a 24 basis point increase in net interest margin to 86 basis points.
Shapiro said Fannie Mae's adoption of hedge accounting treatment for its interest rate derivative hedges and the elimination of the first-period loss on new guaranty contracts should minimize earnings volatility going forward.
The stock fell at the open after the company said it was raising $6 billion through the sale of common stock, convertible preferred stock and non-convertible preferred stock, as well as by cutting its dividend by 29% to 25 cents a share.
Fannie Mae also reported a first-quarter net loss of $2.2 billion, or $2.57 a share, vs. a profit of $961 million, or 85 cents a share, in the same period a year ago, and below the mean estimate of analysts surveyed by Thomson Financial of 81 cents a share.
Net interest income rose 42% to $1.69 billion from last year's $1.19 billion.
Moody's Investors Service followed by downgrading Fannie Mae's bank financial strength rating to B from B+, but affirmed the debt ratings of the Federal National Mortgage Association.
Tomi Kilgore
tk1
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