H&R Block Drops On Mortgage Unit Concerns
Shares of H&R Block (NYSE:HRB) are trading lower today on concerns over its shuttered subprime mortgage business that resurfaced with the company’s second quarter earnings report.
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Late Thursday, the nation’s largest tax preparer announced that its mortgage-related losses had widened, as it booked charges for the previously planned shutdown of its ExpressTax unit.
While H&R Block typically posts a second-quarter loss because most of its revenue comes during tax season, the report also revealed a big spike in claims against its former OptionOne mortgage unit, now called Sand Canyon Corp.
Claims for the quarter amounted to $483 million, more than triple the combined claims seen in the previous four quarters.
While H&R Block executives noted that 85 percent of claims Sand Canyon has reviewed since early 2009 were found to be invalid, the company did set aside an additional $20 million to cover new claims, though executives claim the move was just an accounting issue.
Executives also maintained that Sand Canyon is a legally separate entity, and that the tax firm is protected in the event losses mount above the reserves the mortgage company maintains.
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However, executives have failed to calm investors’ concerns, which are weighing down the stock. H&R Block shares had tumbled 6.54 percent today as of 2:00 p.m. EST, to $15.01 a share. The stock has traded between $11.43 and $18 over the past 52 weeks, and closed Wednesday at $16.06, up 35 percent for the year.