Freddie Mac Reports Derivatives Gains
Propped up by derivatives gains, mortgage-finance company Federal Home Loan
Mortgage Corporation (FMCC) - aka Freddie Mac - reported Q1 results of a
credit-loss benefit of $503 million, versus a provision of $1.83 billion a year
earlier. For the quarter, Freddie has posted $375 million worth of derivatives
gains versus losses of $1.06 billion in same period of 2012 and recorded
noninterest income of $402 million versus a noninterest loss of $1.52 billion in
same period of 2012. Freddie posted a profit of $4.58 billion, compared with a
profit of $577 million in same period of 2012. Freddie announced on Wednesday,
they require no additional draw for Q1 from the U.S. Treasury and have paid $5.8
billion in cash dividends to the Treasury for the quarter, bringing the
aggregate paid since conservatorship began to $29.6 billion with a remaining
dividend obligation to the Treasury of $7 billion in June 2013. Recently,
Freddie's regulator, the Federal Housing Finance Agency restructured how the
government-sponsored enterprises will repay the funds they have drawn from the
Treasury. Instead of paying a 10% dividend on the amount of money they have
drawn, Freddie will now pass along their profits to the Treasury in quarters
when they post a profit and are not required to pay a dividend during periods
when they report a loss. Single-family delinquency rate was reported as 3.03%,
down from 3.51% for same period of 2012, while Freddie's multifamily delinquency
rate was 0.16%, down from 0.23% in same period of 2012. During March, more than
a dozen of the world's biggest banks and the British Bankers' Association were
sued by Freddie, alleging manipulation of interest rates, in the first
government-backed private litigation over the rate-rigging scandal. The suit
alleges the banks colluded to suppress the rate of U.S. dollar Libor, causing
Freddie to suffer losses on interest-rate swaps it used to hedge the risks it
took on in its mortgage-finance business.
For fiscal Q4, Electronic Arts Inc. (EA) adjusted packaged goods sales fell by
25% to $396 million. EA projected they will keep operating expenses flat for the
current fiscal year and full-year earnings per share will come in above Wall
Street’s current estimate. During mid-afternoon trading on Wednesday, shares
were up 15% over $20, a move EA has not seen since the melt-down began in early
2012. The fall was on the heals of disappointing reception of the online game
“Star Wars: The Old Republic” which was part of the reason EA missed full-year
operating plan and led to the resignation of CEO John Riccitiello in March. EA
also gave disappointing sales of key releases such as “Crysis 3” and “Dead Space
3” during the quarter. Forecast for 2014 fiscal year came in at $1.20 per share
on an adjusted basis. The company expects an increase in spending for new Xbox
and PlayStation consoles that are expected to launch this fall. The next sequel
to its blockbuster combat franchise “Battlefield 4” is expected to launch this
fall as well as, new titles for top sports games like “FIFA” and “Madden NFL”.
AOL Inc. (AOL) shares were lower by 9% into mid-afternoon trading Wednesday
after reporting a rise of Q1 earnings by 23% as the company's advertising
revenue continued to climb, outweighing a slide in revenue brought in from
Internet-access subscriptions. Progress is seen by the advertising-driven
digital media company at the hands of Chief Executive Tim Armstrong. AOL's core
business of domestic display advertising remains challenged. AOL reported a
profit of $25.9 million or 32 cents a share, up from $21.1 million or 22 cents a
share for same period of 2012 and revenue improved 1.7% at $538.3 million.
Advertising revenue rose 8.8% to $359.2 million, search revenue increased by
9.5%, global display revenue rose 7.8%, as international display revenue
continued to rise by double digits and domestic display revenue was up about 6%
and advertising revenue from third-party networks was up 9.5%. Internet-access
subscription revenue was lower by 9% at $165.8 million while churn - the
percentage of customers canceling services - fell to 1.9% from 2% in same period
Gold futures settled at highest amount on Wednesday, since April 12, at
$1,473.70 an ounce on the Comex division of the New York Mercantile Exchange.
U.S. Energy Information Administration reported a less than expected rise in
last week's crude supplies, but showed a sizable climb in distillate supplies.
For week ended May 3, crude supplies rose 200,000 barrels. Gasoline stockpiles
fell by 900,000 barrels and distillate supplies rose by 1.8 million barrels.
June crude traded at $95.88 a barrel, up 26 cents or 0.3% after the release of
the data. A 680,000-barrel rise in crude supplies was reported.
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