Monday, 12 May 2008

MBIA Triple A? No Way!

MBIA continues to pretend, with the aid of the ratings agencies, to be a AAA rated company after losing a couple of billion more in 1Q08. From marketwatch.com:

MBIA loses $2.4 billion after write-downs

MBIA Inc. reported Monday a loss of more than $2 billion for the first quarter, its third straight loss, after the company took a $3.6 billion charge for losses on derivatives.

The bond insurer (MBI) continues to struggle with business difficulties in the face of falling house prices and a global credit crisis.

The company's net loss was $2.41 billion, or $13.03 a share. MBIA had earned $198.6 million, or $1.46 a share, in the year-earlier first quarter.

During the first quarter, it recorded a $3.6 billion unrealized loss on insured derivatives.

MBIA had been expected to lose $1.45 a share excluding special items, according to the consensus of a survey of seven analysts by FactSet Research.


2 Comments:

Dean said...

yet the market was expecting worse so MBIA were up 4.5% on the day. do you think we are seeing the return of appetite for financials? risk aversion seems to be disappearing...

The Fundamental Analyst said...

Specifically with MBIA, the whole fear that the monoline bond insurers would lose their AAA ratings which would then start a chain reaction of massive writedowns for the major banks and other financial institutions has now disappataed.

Writedowns have become passe. I think risk appetites are returning for financials but somewhat cautiously.

looking past the writedowns you have to think about what kind of shape these institutions will be in in 6, 12, 18 months time. In my opinion the outlook is bleak as bad debts are skyrocketing and man7 institutions are making heavily dilutive capital raisings.

The outsized profits of large financial instituions of the last few years were made in an entirely different environment to the one we now inhabit. That coupled with aforementioned credit quality problems is seriously going to crimp earnings over the next couple of years IMHO.