In 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|
|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.