Freddie Profits Plunge; Stock Hits 52-Week Low

Freddie Mac -- which is almost current on its earnings releases -- has reported that first-half 2005 profits tumbled by 60% as net interest income fell and the company recorded a massive loss on its derivatives.Freddie released its earnings after the market closed Aug. 31, and in trading Sept. 1 its stock fell more than $2 a share, setting a new 52-week low of $58.05 per share. The government-sponsored enterprise, which earned $1.64 billion in the first half, also reported that guarantee fee and "contractual management" income rose to $720 million (16.4 basis points), compared with $635 million in the first half of 2004. Annualized, its "g-fee" income fell to 15.8 bps, compared with 16.6 bps a year ago. Freddie took a $747 million derivatives loss in the first half, compared with a gain of $521 million in the year-ago period. Sandler O'Neill maintained its "hold" rating on Freddie, saying "we remain cautious until we have increased comfort and visibility in the core earnings power of the company with additional financial disclosures."