Oh, what a bloodbath financial stocks have been this year. We’ve seen commercial bank failures, deathbed derivatives blowups, and a mortgage juggernaut gone amok. There's been no shortage of carnage in the financial industry.
Some investors think the latest crescendo of fear may have (knock on wood) bottomed out in the middle of July, at a time when Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) were in the throes of disaster as the market pondered their future. Since then, things have perked up a bit for financial stocks ... so does that mean the worst is behind us?
Maybe, maybe not -- let's not get too Nostradamus on each other. At any rate, here are some of Thursday's worst-performing financial stocks and a few tidbits about what's pushing them around.
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Stock
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Thursday's Decline
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1-Year Decline
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Research
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PMI Group (NYSE: PMI)
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(23.4%)
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(91.3%)
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Research
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AIG (NYSE: AIG)
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(18%)
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(63.6%)
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Research
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Ambac Financial (NYSE: ABK)
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(21.5%)
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(93.2%)
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Research
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Flagstar Bancorp (NYSE: FBC)
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(14.1%)
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(65.1%)
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Research
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Fannie Mae
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(14.2%)
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(84.6%)
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Research
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Lehman Brothers (NYSE: LEH)
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(13.6%)
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(70.9%)
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Research
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Mortgage insurer PMI coughed up a second-quarter loss of $246.3 million, or $3.03 per share (not too surprising for a mortgage insurer), miles away from analyst expectations of $1.79 per share. Ambac Financial followed suit, slicing off a fifth of its value after a huge run-up in the last week. Ambac has caught some seriously positive breaks in the past week, but I'm still pretty skeptical -- deterioration in the bond market, which is all but certain, causes trouble to feed on bond insurers like a whale feeds on krill. This story isn't over yet.
AIG had one of its worst days ever after swinging to a second-quarter loss of around $5.4 billion. The insurance giant hasn't been a stranger to massive write-offs in the past year, but investors are starting to get seriously annoyed by the sheer size and complexity of AIG's financial conglomeration. Although there hasn't been any official talk, many investors are hoping and calling for a breakup that would free AIG's prosperous segments from the real estate and collateralized debt obligations-poisoned divisions dragging everything else down.
After its equally troubled sibling, Freddie Mac, reported abysmal second-quarter earnings earlier this week, Fannie Mae investors anticipated today's gloomy earnings report -- but not how bad it would be. Shares are down another 9% so far today. Adding a bit of fuel to the fire, bond guru Bill Gross now predicts the Treasury Department will have to step in to purchase preferred shares in Freddie and Fannie by the end of this quarter. Yes, Hank Paulson signs your dollar bills, and soon he might be signing your mortgage applications.
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