estimated its 2005 net income at $2.5 billion Friday, as solid gains in its portfolio of mortgages and mortgage-baked securities combined with low borrowing costs to drive profitability.
Freddie Mac offers the estimate as it works to prepare formal financial statements for filing with the
Securities and Exchange Commission
. The company's reporting schedule has been uneven for several years as it works to clean up an accounting scandal that devastated the government-sponsored enterprise in 2003.
The company said the unpaid balance of its mortgage portfolio rose 12% in 2005 to $1.7 trillion, roughly in line with the growth in the residential mortgage debt outstanding. For the first two months of 2006, the portfolio grew at an annualized pace of 13.5%, Freddie said.
For the year, Freddie's regulatory core capital rose by $1.3 billion, which combined with dividends and other capital transactions of $1.2 billion, results in the $2.5 billion 2005 profit estimate.
"A key driver of the company's success in 2005 was its continued ability to fund mortgage purchases at attractive levels," Freddie said. "Average funding levels remain significantly below LIBOR rates and improved by approximately two basis points vs. LIBOR during 2005 as global fixed-income investors increasingly purchased longer-dated assets such as 5- and 10-year agency securities in a search for higher absolute yields. In addition, the company increased the amount of outstanding callable debt financing its retained portfolio, with approximately $273 billion in callable debt outstanding at year-end."
Freddie also updated its plans with respect to its financial reporting, saying it expects to release quarterly and full-year 2005 results in late May.
"The company's objective is to return to quarterly reporting, and file timely, GAAP-compliant, monthly capital reports with OFHEO, with its release of full-year 2006 results. After the company resumes regular quarterly reporting, it will begin the process of registering its common stock with the Securities and Exchange Commission."