Wednesday's Financial Winners & Losers

Financial stocks were mostly scurrying beneath the buoyant major indices on Wednesday as MGIC's (MTG Quote) big fourth-quarter shortfall dampened the mood.

The Milwaukee-based mortgage insurer said it lost $1.47 billion, or $18.17 a share, thanks largely to soured bulk transactions in which home-equity securitizations were backed by loans generally "reflect[ing] lower average FICO scores and a higher percentage of ARMs [adjustable rate mortgages]." During the quarter, MGIC stopped writing these "Wall Street" bulk transactions, or those in which MGIC knew these loans were serving as collateral, but the activities still did enough damage to necessitate a $1.2 billion premium-deficiency reserve. That sum covers expected net future losses from those transactions while also encompassing preexisting loss reserves.

A year earlier, MGIC had booked a quarterly profit of $121.5 million, or $1.47 a share. Analysts were seeking a loss of just $6.77 a share before special items, according to Thomson Financial.

Also weighing down MGIC's bottom line this past quarter, but not by nearly as much as the bulk transactions, was further red ink from the firm's doomed subprime-focused joint venture with Radian (RDN Quote). The now-bankrupt investment vehicle -- called Credit-Based Asset Servicing and Securitization, or C-BASS -- cost the company another $33 million in the fourth quarter. C-BASS effectively killed MGIC and Radian's proposed merger last year.

MGIC shares were sliding $1.78, or 12.6%, to $12.40. Former suitor Radian was down 13.5% to $7.04 ahead of Friday's scheduled earnings report, and peer PMI (PMI Quote), expected to report on Feb. 26, shed 14.3% to $7.19.

In more earnings, New York insurance broker National Financial Partners (NFP Quote) traded mostly lower after a rising cash profit of $33.9 million, or 83 cents a share, missed the consensus analyst estimate by a penny a share. Shares were lately easing 1.2% to $28.16. IndyMac (IMB Quote), meanwhile, was cut to underperform at Royal Bank of Canada Capital Markets a day after the mortgage lender reported big losses in the fourth quarter and for the full year. IndyMac shares fell 25 cents, or 3%, to $7.99, in retreat from some of yesterday's sizable gains.

RBC likewise cut Florida-based BankUnited Financial (BKUNA Quote) to underperform, and Credit Suisse downgraded asset manager T. Rowe Price (TROW Quote), of Baltimore, to neutral from outperform. BankUnited stock sank 5.8% to $5.97, but T. Rowe Price was lately recovering from morning losses to rise 0.7% at $50.47.

Morgan Stanley (MS Quote) got an Oppenheimer downgrade to perform from outperform today, but shares took back early losses after the New York-based brokerage said it will "scale back its residential mortgage operations" in the U.S. and completely shut down its U.K.-based mortgage-lending unit, laying off about 1,000 employees in the process. Morgan shares were recently tacking on 1.1% to $43.16.

Among the more solid winners Wednesday were student lender Sallie Mae (SLM Quote), Britain-based bank HSBC (HBC Quote), and insurance company Axis Capital (AXS Quote), which were upped to positive ratings at Friedman Billings, UBS, and Wachovia, respectively. Shares of the companies were up 1% or more.

Elsewhere, New York's E*Trade (ETFC Quote) added 2.4% to $5.10 after the beleaguered online broker reported that total average revenue trades in January surged 19% from the prior month, and nearly 22% year over year, to 212,000. Also in January, daily average revenue trades at optionsXpress (OXPS Quote) were up 19% sequentially and 40% from a year earlier to 41,200. Shares of the Chicago-based company rose 54 cents, or 2.2%, to $25.65.

More broadly, the NYSE Financial Sector Index brushed off morning losses to climb 0.4% to 7,510.66, though that performance still fell short of the major averages. The Nasdaq Financial 100 rose 0.6% to 2,721.62, and the Amex Securities Broker-Dealer Index gained 1.1% at 194.49.