Company news: Wells Fargo taking loss on mortgages
Wells Fargo & Co. will take a $1.4 billion provision in the fourth quarter for loan losses, the bank said Tuesday.
In a filing with the Securities and Exchange Commission, the San Francisco-based bank said it will create an $11.9 billion portfolio of the company’s riskiest mortgages, which it plans to liquidate. The portfolio consists of three types of home-equity loans, or additional money loaned to homeowners who already have mortgages.
The portfolio represents about 3 percent of Wells Fargo’s loan balance, and the bank said the debt poses the biggest risk to its balance sheet.
Wells Fargo’s stock slipped 19 cents to $29.64 in after-hours trading Tuesday. The shares closed at $29.83, down 16 percent for the year.
Freddie Mac halved its dividend and unveiled plans to sell $6 billion of preferred stock to bolster the mortgage investor’s finances in anticipation of more losses, the company said Tuesday.
Freddie Mac, which was chartered by Congress to buy home loans from mortgage lenders, will sell $6 billion of a special class of stock.
The money raised through this sale will be used to buttress the company’s balance sheet “in light of actual and anticipated losses,” Freddie said in a statement.
The company’s board also declared a dividend of 25 cents for the fourth quarter, compared with a dividend of 50 cents in the third quarter. The company said it needed to slash the dividend to hold on to enough cash to maintain its financial flexibility and satisfy regulators.
Freddie Mac lost $2 billion in the third quarter because it needed to squirrel away money preparing for borrowers missing payments on their mortgages. Also, the company’s book of mortgage contracts lost substantial value during this year’s credit turmoil.
Staples Inc.‘s third-quarter profit dipped 5 percent as consumers spent less on office supplies, but sales of highly profitable items like ink cartridges grew, and Staples’ performance beat Wall Street expectations.
Investors sent shares of the world’s largest office products supplier up nearly 11 percent, a week after rival Office Depot Inc. saw its shares drop 6 percent when its third-quarter numbers fell.
Staples said net income for the three-month period ended Nov. 3 was $274.5 million, or 38 cents per share, compared with a profit of $289.9 million, or 39 cents per share, in the same period a year ago.