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Countrywide investors shrug off $1.2B loss

The lender's shares rose $4.23 on Friday, its biggest one-day gain since 1982.

By Times wires
Published October 27, 2007

LOS ANGELES - Countrywide Financial Corp. lost $1.2-billion in the third quarter, but its shares soared Friday after the nation's largest mortgage lender said it expects to be profitable this quarter and next year.

It was Countrywide's first quarterly loss in 25 years.

But the company, based in Calabasas, Calif., said it will be profitable in the fourth quarter and in 2008 as it restructures its business to take advantage of the current market.

"We continue to be bullish about the long-term prospects of both Countrywide and our industry," Angelo Mozilo, Countrywide's chairman and chief executive, told Wall Street analysts.

On Friday, Countrywide gained $4.23, or 32 percent, to $17.30 in New York Stock Exchange composite trading.

It was the stock's biggest one-day surge since 1982, and Countrywide was the biggest gainer in the Standard & Poor's 500 Stock Index

The loss for the third-quarter came as mortgage market woes forced Countrywide to set aside millions in loan-loss provisions and writedowns, and the lender originated fewer loans.

Countrywide's loss amounted to $2.85 per share for the July-September period, compared with a profit of $647.6-million, or $1.03 per share, a year ago.

Analysts polled by Thomson Financial, on average, forecast a loss of $1.28 per share for the quarter.

Countrywide reported a $50-million loss in revenue in the third quarter because of the impact of impairments and charges against a $2.82-billion gain during the same period a year ago.

Mozilo attributed the quarterly loss to "unprecedented disruptions" in the mortgage market and the ongoing national housing slump.

Mozilo sought to reassure investors, however, noting steps the company has taken to secure financing, tighten underwriting standards and shift its mortgage lending business into its banking subsidiary, Countrywide Bank.

Chris Brendler, an analyst with Stifel Nicolaus & Co. Inc., said he is not convinced the company will turn a profit next quarter.

"They seem to have taken some big write-downs, taken a lot pain this quarter, the pain going forward should be smaller," he said.

"I still remain concerned about the potential for another credit write-down and just how profitable this business will be, even after they get past the credit headaches in the near term."

[Last modified October 26, 2007, 22:58:12]