IndyMac Bancorp Inc, one of the largest independent U.S. mortgage lenders, on Tuesday posted a quarterly loss more than five times larger than it had projected, hurt by mounting delinquencies and a collapse in investor demand to buy its home loans.
The third-quarter net loss totaled $202.7 million, or $2.77 per share. It was IndyMac's first quarterly loss since the fourth quarter of 1998. Profit a year earlier was $86.2 million, or $1.19 per share.
IndyMac also halved its dividend and said another cut is possible, after a 72 percent decline in its shares this year.
Pasadena, California-based IndyMac, which is also one of the largest U.S. savings and loans, had on September 7 forecast a loss of nil to 50 cents per share.
Excluding items, the loss was $2.74 per share, according to Reuters Estimates, compared with an average analyst forecast of 46 cents.
While this loss is substantially higher than we had been forecasting, it was clearly not unexpected given losses elsewhere in the industry, Chief Executive Michael Perry said. No one in the mortgage industry came away unscathed.
IndyMac joined Countrywide Financial Corp and GMAC's Residential Capital LLC among big independent lenders to report large quarterly losses.
Credit losses at IndyMac quadrupled from the second quarter to $407.7 million, reducing earnings by $3.40 per share, while losses related to the sale of mortgages totaled $167.2 million, or $1.39 per share. Results also reflected costs to eliminate 1,547 jobs, and hedging gains.
IndyMac cut its quarterly stock dividend to 25 cents per share from 50 cents, as expected, leaving it with a dividend yield near 8 percent.
Perry said another significant cut would be prudent if IndyMac isn't profitable in the fourth quarter. He said the company could be modestly profitable or suffer more losses in the fourth quarter and in 2008, but said quarterly losses should be substantially lower than in the third quarter.
IndyMac used to specialize in Alt-A home loans, which often go to people who can't fully document income or assets.
As investors stopped buying these loans, IndyMac shifted toward smaller, safer loans that Fannie Mae and Freddie Mac will buy. Countrywide and GMAC did the same.
Quarterly mortgage production fell 30 percent to $16.8 billion, and IndyMac's market share fell to 3.06 percent from 3.44 percent.
The company ended September with a Tier 1 core capital ratio of 7.48 percent, above the 5.00 percent level that regulators consider well-capitalized, IndyMac said.
It also said it boosted operating liquidity to a record $6.3 billion, helped by a $5 billion increase in deposits since June. IndyMac ended the quarter with $16.8 billion of deposits and $33.7 billion of assets.
Shares of IndyMac closed Monday at $12.77 on the New York Stock Exchange.