Fannie Mae Is Suddenly The Most Profitable Company on Planet Earth

fannie maeIn early April Fannie Mae announced blockbuster profits of $17.2 billion for 2012 and $7.6 billion for  the fourth quarter.  The profits reported for 2012 represented the largest annual and quarterly net profits in the company’s history.  The financial position of Fannie Mae had improved dramatically since 2011 when Fannie Mae reported a loss of $16.9 billion.

Fannie Mae attributed the turnaround in its 2012 financial performance to a decline in serious delinquencies, increased home prices, higher sales prices on the disposition of foreclosed properties and a favorable resolution with Bank of America related to loan buybacks.

Going forward, Fannie Mae said that it expects to remain profitable for the foreseeable future.  Timothy J. Mayopoulos, president and CEO said “We have taken a number of actions since 2009 to manage our legacy book of business, build a healthy new book of business with responsible underwriting standards, priced appropriately for risk, and reduced uncertainty by resolving outstanding issues.”

Continued improvement in the fundamentals driving Fannie’s business was evident today when Fannie Mae reported results for the first quarter.  Income from operations for the first quarter ending March 31, 2013 reached $8.1 billion, the largest quarterly pre-tax income in the company’s history and 300% higher than  earnings of $2.7 billion for the comparable quarter of last year.  Total income for the quarter was boosted when Fannie Mae released a $50.6 billion valuation allowance on deferred tax assets due to improvement in Fannie Mae’s financial prospects.  Including the release of the valuation allowance, quarterly net income soared to $58.7 billion for the first quarter of 2013.

If quarterly income for the remaining three quarters of the year approximate the first quarter’s earnings, Fannie Mae could wind up with total net income for 2013 of an incredible $83 billion.

We all know that $83 billion is a huge amount of profits but how does this compare to the earnings of other hugely profitable companies such as Apple, Exxon Mobil or Microsoft?  Profits of $83 billion are almost twice as much as the most profitable company in the world makes.  Fannie Mae profits of $83 billion almost equals the combined income of Apple, Exxon Mobil and Microsoft combined.

Ten most profitable companies in the world

Rank Company Country 2011 profit in USD
1 Gazprom  Russia $44.4 billion
2 ExxonMobil  United States $41.6 billion
3 Industrial and Commercial Bank of China  China $41.6 billion
4 Royal Dutch Shell  Netherlands $30.9 billion
5 Chevron  United States $26.9 billion
6 China Construction Bank  China $26.1 billion
7 Apple  United States $25.9 billion
8 BP  United Kingdom $25.7 billion
9 BHP Billiton  Australia †† $23.6 billion
10 Microsoft  United States $23.2 billion

After becoming a ward of the state in 2008 after the government placed Fannie Mae into conservatorship, many analysts thought that the company would bleed red ink for decades.  Instead, within a short five years, Fannie Mae is now earning what may become an embarrassingly large amount of profits.

Comments

  1. LiberatedCitizen says:

    And now as Paul Harvey would say, the rest of the story

    “Fannie posted net income of $58.7 billion in the first quarter, due largely to a one-time $50.6 billion gain related to tax benefits.”

    http://online.wsj.com/article/SB10001424127887324744104578472633554555060.html

  2. Mark Farnsworth says:

    I’m tired of how the media skews the numbers to make something bad seem good. And while I’m sure Fannie Mae is in fact making money hand over fist, we are seeing all time highs in unemployment! Does no one else question media and their “reporting?” I bet what made Fannie Mae so much money were the ALL TIME low mortgage rates which prompted so many of us to refinance our homes.

  3. Problem Bank List Staff says:

    The tax benefit clearly contributed the bulk of Fannie’s earnings in the first quarter. In accordance with GAAP accounting rules, the release of the valuation allowance resulted in an accounting gain of $50.6 billion.

  4. Problem Bank List Staff says:

    The Federal Reserve was successful in rescuing the banking industry and Fannie Mae and Freddie Mac through financial repression and massive purchases of mortgage securities. While the banks and GSEs make billions, the median income of the average American has not gone up since 2000.

  5. You seem to have a limited understanding of “tax benefits”.

    When companies have HUGE LOSSES they can carryforward or back these tax benefits. This applies to all companies. When companies use huge losses to offset profits they have a “tax benefit” this is not a hand out. This is how the tax laws read. It basically evens out when you have huge losses and then gains to net out to pay the taxes on what you actually made (to make it very simple).

    This is even available to individuals with their own business etc.

  6. I am happy that these profits are being shared with the American taxpayers…I expect the check to arrive soon.

    Sadly, the average American still struggles while we watch profits soar. I smell another bubble within the next few years.

  7. Why doesn’t Fannie Mae’s owner (still the Federal government?) order it to pay out half its 2012 profits as a dividend. That $40 billion could reduce the 2013 federal deficit by 4%.

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