Mortgage Lender Countrywide Posts $893 million Loss in Q1 2008

NEW YORK - April 29 2008 - Troubled mortgage lender Countrywide Financial Corp. continued to hemorrhage money in a toughening housing climate, reporting Tuesday that it lost $893 million in the first quarter compared to a profit of $434 million during the same period last year.

Countrywide also said it would increase its residential loan loss provision to $1.5 billion as it struggled to get a handle on rising delinquencies and plummeting home values. Charge-offs for the nation’s largest lender climbed to $606 million from $39 million.

The Calabasas, California-based lender lost $1.60 per share for the quarter, compared to a profit of 72 cents a share a year earlier. A poll of analysts conducted by Thomson Reuters had expected to see earnings of 2 cents per share.

The company reported revenue of $679 million, a vast reduction from the profit of $2.4 billion it enjoyed during the same period last year.

Countrywide’s board also declared a dividend of 15 cents a share on the company’s common stock, payable June 2 to shareholders of record on May 14.

Threat to deal

The loss could be another blow to the merger between the lender and one of the nation’s largest banks: Bank of America Corp. agreed in January to acquire Countrywide in a white-knight, $4 billion all-stock deal that would make the firm the largest U.S. mortgage lender.

Both companies continue to lose money, however, making increased shareholder opposition to the deal all but certain.

Countrywide lost a whopping $1.2 billion in the third quarter but reduced the red ink to $422 million in the fourth quarter as the liquidity crisis eased a bit and investors were encouraged by the Bank of America rescue.

But Bank of America itself saw first-quarter profit fall 77% and increased its credit-loss provisions to $4.78 billion, driven by weakness in home-equity loans as well as credit extended to small businesses and home builders.

Since the deal was announced, Countrywide has also become the focus of multiple state and federal investigations into its lending practices and faces numerous lawsuits brought by borrowers alleging illegal conduct in the lender’s foreclosure proceedings.

During its heyday, Countrywide was the nation’s largest subprime lender. As a result, it’s become a poster child for many of the excesses blamed on the lending industry during a decade of unprecedented growth and booming housing values.

That debate rages on, with a Congressional hearing scheduled Tuesday for lawmakers to take a look at predatory lending practices and Bank of America holding a second day of Los Angeles public comment sessions about its bid to acquire Countrywide.

Countrywide posts $893 million first-quarter loss
by Riley McDermid | MarketWatch