Morning Commentary: Fannie Mae preferreds weaken despite increase in quarterly income

By Stephanie N. Rotondo

Seattle, Aug. 3 – Fannie Mae’s preferreds were in play early Thursday following the release of the agency’s latest quarterly results.

And while the bottom line beat year-ago figures, the preferreds were losing ground.

The 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) were down a nickel at mid-morning, trading at $6.85.

For the second quarter, the mortgage guarantor posted net income of $3.2 billion. That compared to income of $2.9 billion for the same quarter of 2016 and $2.8 billion for the first quarter of 2017.

However, net revenues declined to $5.4 billion from $5.5 billion the previous year. In the previous quarter, revenue was $5.6 billion.

If the Federal Housing Finance Agency should require it, Fannie intends to make a $3.1 billion dividend payment to the U.S. Treasury. Prior to that payment, Fannie has paid back $162.7 billion to the government following its September 2008 bailout.

Sector peer Freddie Mac announced its results earlier in the week. A change in the language regarding the dividend had the market wondering if the FHFA was planning to let the GSEs’ start to rebuild their capital cushion.

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