Nationwide Financial Estimates Slashed After Dreary Q1

Credit Suisse has cut its estimates for Nationwide Financial Services (NFS) after a dismal Q1 in which the financial services company reported earnings from continuing operations of $0.95 on $916.3 million in revenue, well short of the $1.11 and $1.17 billion consensus. The miss was largely attributed to a deterioration in commercial mortgage spreads.

We are lowering our 2008 estimate by 5 cents to $4.70 to account for the lower core run rate… As we have witnessed with other insurers, NFS’s net investment income (NII) was suppressed by poor alternative investment performance ($10m below normalized levels) and low bond prepayment activity ($2m below).

The corporate segment produced the biggest delta to our estimates ($9m est. vs. -$14m reported). The main culprit was the continued deterioration in commercial mortgage spreads, which produced $17m of MTM losses on the $160m of CRE loans they are warehousing. While synthetic spreads have come in since the quarter end, they still remain at highly elevated levels; therefore we believe this inventory is still under water.

NFS’ poor quarter is not expected to effect its potential deal with Nationwide Mutual.

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at

Tagged In