Interest Rate Roundup

Monday, January 14, 2008

Charges, charges, everywhere...

With my apologies to Thomas Paine, these are the times that try bloggers' souls. There is so much news in the interest rate and credit markets right now, I can hardly keep up with it. But I'll try my best to hit on some of the major announcements this morning ...

* M&T Bank said it earned just $64.9 million in the fourth quarter. That was a hefty 70% year-over-year drop. The company announced a $127 million impairment on CDO holdings. It also boosted its provision for loan losses to $101 million from $28 million a year earlier. The firm noted problems with Alt-A mortgages and loans to residential developers.

* Sovereign Bancorp, the second-largest S&L in the U.S., also announced its own hefty hit. the company said it would take $1.58 billion in charges in the fourth quarter -- $1.4 billion of which is the write down of goodwill related to two business segments. Essentially, Sovereign is saying its consumer lending business and New York-area banking business aren't worth what they once were. Or quoting from the release:

"A combination of a weakening consumer credit market, lower valuations for banking companies, and Sovereign's decision to stop originating automobile loans in the Southeast and Southwest resulted in the goodwill impairment for the Consumer segment.

"The New York Metro segment's goodwill relates primarily to Sovereign's June 2006 acquisition of Independence Community Bancorp. Earnings for this segment have been negatively impacted by the current operating environment. Consequently, revenue and deposit growth have been less than expected."

Another $180 million of the charge relates to the declining value of Fannie Mae and Freddie Mac preferred shares. Lastly, Sovereign said it would take a $27 million hit tied to fianancings Sovereign provided to two unidentified mortgage firms.

* Shares of NovaStar Financial, the struggling subprime lender that's been facing financing pressures for many months, were recently down about 38%. The company slashed 170 of its 200 workers and said it would discontinue its retail lending and mortgage brokerage operations.

That's it for now, but I'm sure there will be to come as we get into the heart of earnings confessional season.


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