Archive for April, 2009

February home prices up, down 6.5 percent in year (Reuters)

Wednesday, April 22nd, 2009 | Finance News

NEW YORK (Reuters) –
Prices of U.S. single-family homes rose by a seasonally adjusted 0.7 percent in February from January but were down 6.5 percent from a year earlier, the Federal Housing Finance Agency said on Wednesday.

The regulator's monthly home price index for January was revised down to a 1 percent increase from a previously reported 1.7 percent gain.

The index is 9.5 percent below its April 2007 peak.

For the nine Census Divisions, seasonally-adjusted monthly price changes in February ranged from a 1.2 percent decline in the East North Central Division to a 3.8 percent increase in the Pacific Division, FHFA said.

The index is calculated using purchase prices of houses financed with mortgages that have been sold to or guaranteed by mortgage finance sources Fannie Mae (FNM.N) (FNM.P) or Freddie Mac (FRE.N) (FRE.P).

FHFA regulates Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks.

(Reporting by Lynn Adler, Editing by Chizu Nomiyama)


Ethan Allen shares slump after results prereleased (AP)

Wednesday, April 22nd, 2009 | Finance News

CHICAGO – Shares of home furnishings retailer Ethan Allen Interiors Inc. sank Wednesday, a day after the company released preliminary third-quarter results and halved its dividend, prompting at least one analyst to downgrade the stock.

Shares of the company were down 83 cents, or 6.5 percent, at $12.04 in late-morning trading after dipping as low as $10.66 earlier in the session.

Raymond James analyst Budd Bugatch cut his rating on the Danbury, Conn.-based company to "Market Perform" on Wednesday, down from "Outperform" and placed estimates under review after the "disappointing" results issued late Tuesday.

"Despite its excellent management, cohesive business model and highly recognizable brand, Ethan Allen's sales remain under severe (and increasing) pressure due to the difficult economy and the highly discretionary nature of its product," Bugatch wrote in a research note.

On Tuesday, Ethan Allen said it will likely lose between $17 million and $18 million for the third quarter, because of a massive sales drop attributed to the recession.

That amounts to a per-share loss between 59 cents and 63 cents. Excluding restructuring and impairment charges, Ethan Allen said it lost $12.5 million to $13.5 million, or between 43 cents and 47 cents a share, in the three-month period that ended in March.

Sales slumped nearly 41 percent, but the company did not specify what it expected quarterly revenue to be when it formally releases results on April 30.

Analysts had expected the company to earn 4 cents a share in the period on revenue of $170.1 million. They typically exclude one-time items from their estimates.

During the same period last year, the company earned $8.8 million, or 30 cents a share, on revenue of $235.9 million.

KeyBanc analyst Bradley Thomas, who expected the company's sales to slip 30 percent, said the results were far worse than expected and showed a dramatic deterioration from the second quarter, when sales fell 27 percent compared with a year earlier.

"In fact, this is the largest quarterly decline we have seen within our entire coverage universe, and we believe the sales weakness is exacerbated by the company's stance of everyday low price in an environment in which the competition remains very promotional," he wrote to investors.

Also Tuesday, Ethan Allen said its board halved the company's quarterly cash dividend to 5 cents per share to preserve cash. The new dividend is payable July 24 to shareholders of record as of July 10.


Wells Fargo has record profit, tops in mortgages (Reuters)

Wednesday, April 22nd, 2009 | Finance News

NEW YORK (Reuters) –
Wells Fargo & Co (WFC.N) posted a record first-quarter profit of $3.05 billion as a surge in mortgage refinancings helped it displace Bank of America Corp (BAC.N) as the nation's largest home lender.

The San Francisco-based bank is adding market share and deposits as rivals including Countrywide Financial Corp, once the nation's largest mortgage lender, and IndyMac Bancorp Inc (IDMCQ.PK) reduce risk or disappear. Results were also bolstered by the acquisition of Wachovia Corp on December 31.

"Wells looks like one of the winners," said Thomas Russo, a principal at Gardner, Russo & Gardner in Lancaster, Pennsylvania, which owns the bank's shares. "People left IndyMac, Countrywide and other local California disasters. So Wells Fargo is getting more deposits. And they can make loans that competitors can't."

Net income, excluding payment of preferred stock dividends, rose 19 percent to $2.38 billion from $2 billion a year earlier. Profit per share fell to 56 cents from 60 cents because Wells Fargo issued stock to buy Wachovia for $12.5 billion, creating the fourth-largest U.S. bank by assets.

Excluding one-time items, profit was 59 cents per share, 4 cents more than analysts expected, Reuters Estimates said. Revenue totaled $21.02 billion, topping the average $19.91 billion forecast, and rose 16 percent excluding the impact of Wachovia.

Results included $516 million of securities writedowns.

Larger rivals Bank of America, JPMorgan Chase & Co (JPM.N) and Citigroup Inc (C.N) have also posted better-than-expected quarterly results, though lenders have been bolstered by trading gains and accounting changes that may not recur.

Wells Fargo made $101 billion of home loans in the quarter, twice as much as in the fourth quarter and the most since 2003, as benchmark rates fell below 5 percent.

The bank added 5,000 mortgage jobs in the quarter, and ended March with $100 billion of mortgages yet to be closed.

Loan volume surpassed the $89.3 billion of loans made by Bank of America, which bought Countrywide last July. Bank of America has since slashed Countrywide's subprime and adjustable-rate loan operations.

Wells Fargo's results were slightly better than the bank projected on April 9. Its shares rose 32 percent that day.

The bank returned to profit after losing money in the fourth quarter, its first loss in seven years. Wells Fargo's largest shareholder is Warren Buffett's Berkshire Hathaway Inc (BRKa.N) (BRKb.N).

In afternoon trading, Wells Fargo shares were up 64 cents, or 3.4 percent, to $19.45 on the New York Stock Exchange. Through Tuesday, the shares had fallen 36 percent this year.


Wells Fargo set aside $4.56 billion for credit losses and charged off $3.26 billion, while nonperforming assets totaled $12.61 billion.

The bank said its $22.85 billion reserve will cover 12 months of consumer losses and at least 24 months of commercial and commercial real estate losses. Wells Fargo took a $37.2 billion writedown on riskier Wachovia loans when it bought that bank, and does not expect another writedown on that portfolio.

In an interview, Chief Financial Officer Howard Atkins said the bank is still emphasizing "plain vanilla" home loans, eschewing the "crazy stuff" that hurt many rivals.

While the bank has resumed foreclosures after a short moratorium, Atkins said, "We're bending over backwards to keep people in their homes. A lot of foreclosures are taking place in second homes and investment property, where foreclosures are really the only way we can protect the interests of the bank."

The bank said it added $10.8 billion of core deposits in the quarter, ending with $756.2 billion, even as $34 billion of high-yielding certificates of deposits from Wachovia matured.

Wells Fargo last year took $25 billion from the Treasury Department's Troubled Asset Relief Program, but has long said it did not need the capital. It said its ratio of tangible common equity to tangible assets was 3.28 percent as of March 31; some analysts prefer a ratio closer to 5 percent.

The bank slashed its dividend 85 percent in March, and still expects $7 billion of annual cost cuts, including $5 billion tied to Wachovia starting this quarter. Atkins said "there is a certain amount of duplication that can be eliminated" in employment. The bank employs 272,800 people.

Wells Fargo is one of 19 banks facing government "stress tests" to see if they need capital to handle a deep recession. Results are due May 4. Atkins declined to discuss the tests.

(Reporting by Jonathan Stempel; Additional reporting by Dan Wilchins; editing by John Wallace)