Coming a step closer to timely financial reporting, Fannie Mae said Thursday that its profit was down 36% last year, at $4.1 billion, and that it expects credit losses in its guarantee business to increase significantly this year.

Fannie also said it expects net interest income to fall as the cost of debt increases and interest-earning assets decline.

Still, Daniel H. Mudd, Fannie's president and chief executive, said in a press release that the government-sponsored enterprise is "well positioned to weather the turmoil in the mortgage market."

Fannie's book of business is growing faster than the overall mortgage market as demand revives for conforming loans, he said.

During a conference call with investors, Mr. Mudd said there was "more potential volume in straightforward fixed rate products and ARMs" and in higher quality nonprime and nontraditional products.

Fannie's chief risk officer, Enrico Dallavecchia, said on the call that he expects the "broad decline" in the credit markets to last at least until late 2008.

The GSE reaffirmed its intention of returning to timely financial reporting by the end of February, which would end a longstanding and costly remediation effort.

An accounting scandal that surfaced several years ago led to the departure of Mr. Mudd's predecessor and forced Fannie to restate earnings for 2001 through 2004.

Reporting full-year 2006 results "is one of the last major hurdles we had to clear," Robert T. Blakely, an executive vice president at Fannie and its chief financial officer, said in a press release. (Another executive vice president, Steven M. Swad, is expected to begin moving into the CFO role now that the 2006 results have been reported.)

Administrative costs rose 69% last year, to $3.1 billion, mostly related to restating the company's earnings.

Net interest income fell 41%, to $6.8 billion, on a lower portfolio balance and narrowing spreads between borrowing costs and earning assets' average yield.

"Looking back, 2006 was a rebuilding year," Mr. Mudd said.

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