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Countrywide Set To Turn Profit After Losing $1.2 Billion

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The Associated Press

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 Calabasas, Calif.-based company 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,' Chairman and Chief Executive Officer Angelo Mozilo said during a conference call with Wall Street analysts.

Shares jumped $4.23 to close at $17.30. The stock is down from its 52-week high of $45.26.

The loss for the third-quarter came as mortgage market woes forced Countrywide to set aside millions in loan-loss provisions and write-downs, 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 forecast a loss of $1.28 per share for the quarter.

Countrywide reported revenue of negative $50 million in the third quarter because of the impact of impairments and charges, versus $2.82 billion 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.

The executive 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., 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,' Brendler 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.'

Mozilo also said he was cooperating with an informal inquiry by the Securities and Exchange Commission into his sales of Countrywide stock.

'At no time did I make any trading decisions based on any material nonpublic information, and I fully complied with all company policies,' Mozilo said during the call. 'I am confident that this will demonstrate that I've complied with all protocols.'

In its earnings report, the company said origination volume fell to $96 billion, from $118 billion, as Countrywide shifted to traditional loans.

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