Countrywide Financial, the US' largest mortgage lender and loan servicer, reported a US$1.2 billion loss in the third quarter of this year on Friday, but said it expected to return to profitability by the end of the year as the housing crisis subsided and it capitalized on disruptions in the home loan market.
Although the loss was Countrywide's first in 25 years, its upbeat outlook pushed the company's shares up 32 percent on Friday, to US$17.30. Nevertheless, the stock is down 60 percent this year.
"Countrywide and our very capable management team have taken the steps we believe that are necessary to position Countrywide to continue our long-term track record of success," the company's founder and chief executive Angelo Mozilo said in a conference call with analysts.
Citing the upheaval in the nation's mortgage and residential real estate market, Countrywide officials said it incurred a pretax loss of US$1.97 billion in the third quarter, in contrast to a US$665 million profit in the second quarter of this year. Loan financings fell to US$96 billion in the quarter, down from US$118 billion during the same period of last year. The company said 90 percent of its loans were made through Countrywide Bank.
Delinquencies among the company's loans continued to rise significantly. For instance, in its portfolio of pay option adjustable-rate loans, which allow the borrower to pay no principal and only a small percentage of the interest owed, 3 percent were more than 90 days late in the quarter. During the same period last year, 0.3 percent were that far behind.
Reflecting the declining value of mortgages made previously, the company adjusted the values of loans on its books, recording charges of almost US$900 million against those in its inventory or still in its pipeline at the end of the quarter. The provision for credit losses on the loans it holds for investment totaled US$934 million; most of it, US$790 million, was recorded at Countrywide Bank.
Countrywide wrote down US$690 million more on the value of residual interests it holds in home equity lines and subprime loans it has made.
Kenneth Bruce, an analyst at Merrill Lynch who had a sell rating on Countrywide shares, upgraded the stock to neutral on Friday because the loss was not as bad as had been expected. Last August, Bruce warned investors that Countrywide could face solvency hurdles as the market for commercial paper, its main source of financing for mortgages, seized up.
Countrywide said on Friday that it had enough capital, liquidity and financing for its operations and growth plans. In addition to the US$11.5 billion in bank lines secured last month, Countrywide said it had arranged a one-year, US$10.4 billion commercial paper facility and US$6.25 billion in repurchase agreements.
At the beginning of the conference call, Mozilo praised Henry Cisneros, a Countrywide director whose resignation was disclosed on Wednesday.
Cisneros, a former US housing and urban development secretary, said that he had left the board to focus on CityView, a home builder financing company he runs. Mozilo said the nominating committee of Countrywide's board was searching for an independent director to replace Cisneros.
Restaurant chain Din Tai Fung (鼎泰豐) today announced it is to close 14 stores in northern China, completely exiting the market by the end of October. Beijing Hengtaifeng Catering Co (北京恆泰豐餐飲), which operates Din Tai Fung restaurants in northern China, said its 20-year operating license expires this year. As the board was unable to reach a consensus on continuing operations, its 14 restaurants in the region are to close by Oct. 31, it said. The company apologized for the inconvenience and disappointment the news would cause among its customers, and said it would provide compensation for its workers. “We continue to be optimistic about
EXPANDING: The European Commission has contributed 5 billion euros in state aid to TSMC’s 12-inch wafer fab in Dresden, Germany, which broke ground on Tuesday Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) on Saturday said that it has received a total of NT$62.5 billion (US$1.95 billion) in subsidies from China and Japan since 2022. In the first half of this year, TSMC received NT$7.96 billion in subsidies from China and Japan after receiving about NT$47.55 billion last year and obtaining NT$7.05 billion in 2022, financial data compiled by the world’s largest contract chipmaker showed. The company, which makes about 90 percent of the world’s high-end semiconductors, said the subsidies were used to finance its investments in Kumamoto, Japan, and Nanjing, China. TSMC owns a 12-inch wafer fab in
STRATEGIC SHIFT: Diversifying away from the volatile flat-panel industry, AUO aims to boost sales contribution from non-panel business to half of total revenue by 2027 AUO Corp (友達) yesterday said it has agreed to sell its idled manufacturing facility and land in Tainan to Micron Technology Inc for NT$7.4 billion (US$231.8 million) as the company shifts strategy to reduce the impact from the boom-and-bust flat-panel display industry. The company expects to book NT$4.17 billion in disposal gains from the sale, it said in a Taiwan Stock Exchange filing. The Tainan factory produced color filters used in monitors, notebook computers and flat-panel TVs before being shut down last year, as AUO sought to optimize its asset utilization. The company has been striving to diversify and broaden its business
Micron Technology Inc has reportedly set its sights on two facilities owned by flat-panel maker AUO Corp (友達) after Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) recently clinched a deal to buy a facility and equipment from Innolux Corp (群創), another major flat-panel maker. Micron, the world’s third-largest memorychip maker, is expected to purchase two AUO plants in Tainan to expand its advanced chip packaging and testing services and high-bandwidth memory production, local media reports said. The two plants were shut down in August last year and AUO is seeking to dispose of the facilities, the reports said. They are expected to cost Micron