Countrywide loses $1.2 billion

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 Angelo Mozilo said during a conference call with Wall Street analysts.

Shares jumped $4.23, or 32.4 percent, to close at $17.30 on Friday after rising as high as $17.51. The stock is down 64 percent 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 writedowns, and the lender originated fewer loans.

Countrywide’s loss amounted to $2.85 per share for the July-September period in contrast to 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 revenue figure 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.

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 of 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 informal inquiry by the Securities and Exchange Commission into his sales of his 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 its product mix to more traditional loans.

Countrywide ramped up its loan-loss reserves to fight rising delinquencies and defaults, especially among subprime mortgages given to customers with poor credit history. Countrywide reserved $934 million for bad loans in the third quarter, up from $38 million held during the same quarter last year.

Some 4.41 percent of Countrywide’s conventional first mortgage loans were delinquent as of Sept. 30, up from 2.57 percent in the year-ago quarter. For prime home-equity loans, delinquencies inched up to 13.5 percent from 13.4 percent.

The number of subprime loans that were behind in payments soared to 29.08 percent from 18.32 percent in the year-ago period.

In the subprime loan category, 12.63 percent of the loans were behind in payments by 90 days or more, more than twice the year-ago rate.

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