H&R Block posts wider loss due to mortgage unit charges

NEW YORK - H&R Block Inc., the biggest US tax preparer, fell 3.3 percent in New York trading after it reported a wider-than-expected loss on write-downs tied to closing its money-losing mortgage business.
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The loss for the quarter ended Oct. 31 was $502.3 million, or $1.55 a share, compared with a loss of $156.5 million, or 49 cents, a year earlier, the Kansas City, Mo.-based company said yesterday in a regulatory filing. H&R Block dropped 65 cents to $19.30 in New York Stock Exchange composite trading.

Richard Breeden, the hedge-fund manager and former head of the Securities and Exchange Commission, replaced Mark Ernst as chairman last month after H&R Block's Option One Mortgage Corp. lost more than $1 billion over five quarters. The yearlong effort to sell the unit ended Dec. 4 when a proposed sale to Cerberus Capital Management collapsed and 620 jobs were cut.

"What's always a weak quarter was even weaker because of continuing mortgage charges," said Charles Bobrinskoy of Chicago-based Ariel Capital Management, the fourth-biggest H&R Block stockholder with 18 million shares. "Breeden has said they should never have been in the lending business. He has a nice grace period because we were all so unhappy with previous management."

About $366 million of the loss was from discontinued operations, mostly tied to Option One, H&R Block said. The company failed to report fiscal second-quarter results as scheduled Monday and will file full results by Friday.

"We continue to move resolutely to end our participation in the subprime mortgage business," Breeden said yesterday in a statement. "While we incurred a painful loss in exiting these positions, we determined to take our lumps and move forward."

H&R Block has fallen 16 percent this year as the worst US housing recession in 16 years caused higher loan losses and reduced new business for Option One. The company is trying to sell Option One's billing and collections unit, the only part that won't be closed by January.

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source: boston.com