Freddie Mac Profit Soars On Tax Gains - Update

(RTTNews) - Freddie Mac (FMCC.OB) Thursday reported a hefty third-quarter profit due mainly to tax benefits, with most of the earnings enriching the US Treasury.

The mortgage guarantor posted third-quarter net income of $30.5 billion, which included $24 billion related to the release of valuation allowance on deferred tax assets. In the prior-year quarter, Freddie Mac posted net income of $2.9 billion.

Freddie Mac said it will pay $30.4 billion in dividends to the Treasury in December.

After payment of dividends, Freddie Mac said net income to common stockholders for the quarter was $50 million or $0.02 per share, compared with $1.12 billion or $0.35 per share a year ago.

Freddie Mac and its sister concern Fannie Mae (FNMA.OB) went bankrupt after the 2008 financial crisis and had to lean on federal aid aggregating about $190 billion. Both entities have since rebounded on the back of some improved home prices and lower delinquencies.

With the dividend payment to the Treasury in December, Freddie Mac will have repaid the entire $71.3 billion received in aid as well as a further $9 million.

Freddie Mac's net interest income in the quarter was $4.276 billion, marginally up from $4.269 billion a year ago.

The quarter included a benefit for credit losses of $1.14 billion, compared with a provision of $610 million in the prior year. Derivative losses for the quarter were $74 million, down from $488 million a year ago.

In October, Freddie Mac entered into agreements with JPMorgan Chase & Co. (JPM) to settle certain single-family loan representation and warranty claims as well as litigation related to its investment in certain private label securities. Freddie Mac will be paid about $3.2 billion, which will be reflected in its fourth-quarter results.

Earlier today, Fannie Mae said its quarterly profit surged to $8.74 billion from $1.82 billion last year. Fannie Mae said it would be making an $8.6 billion dividend payment to the government and will have repaid about $114 billion in payments to the Treasury by December.

Freddie Mac stock is trading at $2.29, up $0.08 or 3.62%, on a volume of about 94 thousand shares.