Capital One’s $17B mortgage sale paves way for stock repurchase

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Capital One's $17B mortgage sale paves way for stock repurchase


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Capital One Financial Corp. plans to repurchase shares following the sale of $17 billion in mortgages to a Credit Suisse subsidiary.

Capital One, which is exiting the mortgage business, is selling the portfolio of first- and second-lien loans to Credit Suisse’s DLJ Mortgage unit.

“Strong market demand enabled us to negotiate and sign this complex transaction more quickly than we thought possible,” said Capital One Chief Financial Officer R. Scott Blackley in a press release.

Capital One Financial expects to close on the loan sale and record a gain related to it, as well as to resume repurchasing shares, in the second quarter.

“The timing and exact amount of any Capital One stock repurchases will depend on various factors, including market conditions, opportunities for growth, and the company’s capital position and amount of retained earnings,” according to the press release.

Although Capital One is exiting the residential mortgage business, it remains active as a commercial real estate lender and in several other lines of consumer finance. During the first quarter, Capital One recorded a 71% year-to-year gain in net income due to loan growth and higher interest rates.

For Credit Suisse, the transaction may suggest a greater appetite for home loans. The company last year put some of its legacy issues related to the residential mortgage business behind it by agreeing to a final settlement in two legacy securities lawsuits filed by Massachusetts Mutual Life Insurance Co. Its activity in the secondary mortgage market recently has included buying and securitizing reperforming agency and government loans.



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