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H&R Block shares tumble on warning
Shares of H&R Block Inc. (NYSE:HRB - news) tumbled 11 percent on Friday, a day after the largest U.S. tax preparer warned it would take a charge related to its struggling mortgage unit, and the stock was downgraded to "neutral."
The charge of $61.3 million, or 19 cents a share, is related to $102.1 million in pretax losses is related to the rising numbers of Block's subprime mortgage customers falling behind on loan payments.
H&R Block shares were $2.44 lower to $20.35 on the New York Stock Exchange.
The charge, disclosed in a regulatory filing after the closing bell on Thursday, also prompted brokerage UBS to cut its rating on the stock to "neutral" from "buy" Friday morning.
Kansas City, Missouri-based H&R Block said in the filing it expects to set aside $46.1 million for loans sold in its first fiscal quarter ended July 31, and an additional $56 million to repurchase loans sold in prior quarters. It plans to report the loss in the first quarter.
H&R Block is to report quarterly results on August 31.
Analysts said the charge raises questions about whether "subprime" borrowers, those with less-than-stellar credit histories, may be having more difficulty keeping up with payments as benchmark interest rates rise.
"Investors are already discounting a more conservative outcome for most sub-prime lenders, though we think the announcement from H&R Block could further undermine confidence in the sub-prime sector," said Merrill Lynch analyst Kenneth Bruce in a research note Friday.
Bruce said news of a slowing housing market, forecasts of rising credit losses and accelerating repurchase losses will further weigh on subprime lenders' shares.
(Additional reporting by Chris Sanders and Jon Stempel)
Shares of H&R Block Inc. (NYSE:HRB - news) tumbled 11 percent on Friday, a day after the largest U.S. tax preparer warned it would take a charge related to its struggling mortgage unit, and the stock was downgraded to "neutral."
The charge of $61.3 million, or 19 cents a share, is related to $102.1 million in pretax losses is related to the rising numbers of Block's subprime mortgage customers falling behind on loan payments.
H&R Block shares were $2.44 lower to $20.35 on the New York Stock Exchange.
The charge, disclosed in a regulatory filing after the closing bell on Thursday, also prompted brokerage UBS to cut its rating on the stock to "neutral" from "buy" Friday morning.
Kansas City, Missouri-based H&R Block said in the filing it expects to set aside $46.1 million for loans sold in its first fiscal quarter ended July 31, and an additional $56 million to repurchase loans sold in prior quarters. It plans to report the loss in the first quarter.
H&R Block is to report quarterly results on August 31.
Analysts said the charge raises questions about whether "subprime" borrowers, those with less-than-stellar credit histories, may be having more difficulty keeping up with payments as benchmark interest rates rise.
"Investors are already discounting a more conservative outcome for most sub-prime lenders, though we think the announcement from H&R Block could further undermine confidence in the sub-prime sector," said Merrill Lynch analyst Kenneth Bruce in a research note Friday.
Bruce said news of a slowing housing market, forecasts of rising credit losses and accelerating repurchase losses will further weigh on subprime lenders' shares.
(Additional reporting by Chris Sanders and Jon Stempel)
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