May 27 (Reuters) - Lehman Brothers widened its 2008 loss estimates for Freddie Mac FRE.N and Fannie Mae FNM.N, saying Freddie Mac and Fannie Mae businesses will be characterized by surging revenue on the positive side and credit costs on the negative side in the near term.
If Congress imposes a fee on government-sponsored enterprises (GSEs) to support affordable housing as contemplated in the House & Senate GSE Reform bills, Lehman said it would cost Fannie Mae and Freddie Mac roughly 30 cents a share annually.
Lehman sees a loss of $1.65 per share for Freddie Mac compared with its prior view of a loss of $1.50 per share. For Fannie Mae, it widened its 2008 loss-per-share estimate to $2.39 from its prior view of $2.23.
Lehman said as credit costs normalize, rising revenues should support significant earnings power and expects robust balance sheet growth from Fannie Mae and Freddie Mac over the next few years.
For Freddie Mac, it sees 14 percent year-over-year growth in 2008, 10 percent in 2009, and 8 percent in 2010.
For Fannie Mae, it sees 17 percent year-over-year growth in 2008, with 9 percent growth in both 2009 and 2010.
Lehman has an “overweight” rating on both Freddie Mac and Fannie Mae. It has a price target of $45 on Freddie Mac and a target of $46 on Fannie Mae.
While Freddie Mac closed at $25.73 Friday on the New York Stock Exchange, Fannie Mae shares closed at $27.59. (Reporting by Jennifer Robin Raj in Bangalore; Editing by Jarshad Kakkrakandy)