Marshall & Ilsley Corp.’s stock tumbled today, the first day of trading after the company announced on Thursday it expects to report a second quarter net loss of $1.50 to $1.60 per share as it absorbs up to $900 million in losses in the deteriorating housing market.
“The continuing deterioration in the housing market, particularly in Arizona, on Florida’s west coast and in selected relationships in our correspondent business, makes this the prudent action to take at this time. While we cannot predict whether or not we have reached the bottom of the current housing cycle, we do believe the actions we have announced adequately address the current exposure embedded in our housing-related construction and development portfolio,” said Mark Furlong, president and chief executive officer of Milwaukee-based Marshall & Ilsley, told Small Business Times.
Marshall & Ilsley has been acutely vulnerable to the housing meltdown because the company had decided to expand in Arizona and Florida, two markets that have been most severely impacted by the bursting of the housing bubble.
M&I will report 2008 second quarter financial results on Wednesday, July 16.
The corporation expects to return to profitability in the third quarter of 2008.
“Obviously, we are disappointed with a loss in the second quarter; however, we are fortunate that our strong capital position allows us to increase our reserves without cutting our dividend or engaging in a dilutive capital raising transaction,” Furlong said.
Marshall & Ilsley’s stock fell $1.62 to $12.50 per share today on the news. The stock hit a new low, far below its 52-week high of $48.37.
The company’s announcement of its pending losses also prompted Wall Street analysts to lower their ratings of Marshall & Ilsley’s stock this morning.
J.P. Morgan & Securities and Morgan Keegan downgraded M&I’s stock and made note of a possibility of a dividend cut by the bank holding company. JP Morgan downgraded M&I’s stock to “underweight” from “neutral,” and Morgan Keegan downgraded the stock to “market perform” from “outperform.”
“Not only has the credit picture meaningfully deteriorated from the prior quarter, it appears that the (M&I) problems are running deeper than at peer banks,” JP Morgan stated.