Freddie Beats Estimates Despite Credit Costs

Freddie Mac narrowed its quarterly loss to $151 million ($0.66 per share) in the first quarter, despite a significant increase in credit costs. By contrast, Freddie Mac reported a $2.5 billion net loss in the fourth quarter. Freddie Mac executives said the company benefited from higher securitization volume, a higher guarantee fee rate, and higher net interest income. Freddie's first-quarter provision for credit expenses totaled $1.2 billion, and the company raised its estimate of credit costs for 2008 as a whole. But at the same time, Freddie Mac now projects that net interest income will grow 40%-50% this year, driven by higher portfolio volume and better interest rate spreads. Freddie is also expecting its guarantee fee income to increase by 15%-20% this year. In a conference call with investors, chief financial officer Buddy Piszel said Freddie Mac does not plan any new cuts to its dividend payments. Wall Street reacted favorably, with the company's stock rising about 9% in morning trading on news that the loss was narrower than the consensus estimate of analysts polled by Thomson Financial, which predicted a $0.92 per share loss.