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Bear Stearns & Wachovia Meltdown
If you need more proof that the mortgage crisis has spread beyond subprime mortgage lenders all you need to do is take a look at the first quarter earnings for two of the top mortgage lenders in America.
Bear Stearns, who was acquired last month by JPMorgan due to a liquidity crisis, said on Monday that profits fell 79 percent in its fiscal first quarter. Net income for the quarter fell $1.15 million compared to $554 million just a year ago.
Bear Stearns said since the liquidity crisis and the announcement of the merger, the Company has experienced substantial deterioration of its earnings. The closing of the merger with JPMorgan (NYSE: JPM) is expected to occur by June 30, 2008. The Company believes that the termination of the JPMorgan Chase guaranties prior to consummation of the merger or the parties' failure to consummate the merger could seriously jeopardize the Company's financial viability.
Wachovia, expected to post a profit by many analysis, surprised investors with a first quarter loss of $393 million, the bank also cut its quarterly dividend by 41 percent to 37.5 cents. Wachovia is also planning to raise $7 billion through stock offerings to help increase liquidity.
Wachovia’s losses are in large portion to its merger with Golden West whose portfolio was about 90 percent option arm loans which allows borrowers to pay less than interest on their home loan. Wachovia plans to scale back on home loans and start emphasizing on wider array of loan products.
Wachovia’s loss and Bear Stearns rapid deterioration may suggest that the mortgage meltdown may be facing a downturn to a greater extent than what many may have anticipated.
Submitted by admin 4/14/08
If you need more proof that the mortgage crisis has spread beyond subprime mortgage lenders all you need to do is take a look at the first quarter earnings for two of the top mortgage lenders in America.
Bear Stearns, who was acquired last month by JPMorgan due to a liquidity crisis, said on Monday that profits fell 79 percent in its fiscal first quarter. Net income for the quarter fell $1.15 million compared to $554 million just a year ago.
Bear Stearns said since the liquidity crisis and the announcement of the merger, the Company has experienced substantial deterioration of its earnings. The closing of the merger with JPMorgan (NYSE: JPM) is expected to occur by June 30, 2008. The Company believes that the termination of the JPMorgan Chase guaranties prior to consummation of the merger or the parties' failure to consummate the merger could seriously jeopardize the Company's financial viability.
Wachovia, expected to post a profit by many analysis, surprised investors with a first quarter loss of $393 million, the bank also cut its quarterly dividend by 41 percent to 37.5 cents. Wachovia is also planning to raise $7 billion through stock offerings to help increase liquidity.
Wachovia’s losses are in large portion to its merger with Golden West whose portfolio was about 90 percent option arm loans which allows borrowers to pay less than interest on their home loan. Wachovia plans to scale back on home loans and start emphasizing on wider array of loan products.
Wachovia’s loss and Bear Stearns rapid deterioration may suggest that the mortgage meltdown may be facing a downturn to a greater extent than what many may have anticipated.
Submitted by admin 4/14/08