Countrywide Profit Falls 37%; Company Cuts Forecast
Countrywide Financial on Thursday said first-quarter profit fell 37% and cut its 2007 earnings forecast, reflecting difficulties for the largest U.S. mortgage lender in a weakened housing market.
Much of the shortfall stemmed from Countrywide's "subprime" operations, which involves home loans to people with weaker credit histories. The subprime sector has been under pressure as housing price appreciation slows and homeowner defaults rise.
Countrywide shares fell 3% in premarket electronic trading.
Net income for Calabasas, California-based Countrywide fell to $434 million, or 72 cents a share, from $683.5 million, or $1.10, a year earlier. Revenue fell 15% to $2.41 billion.
Analysts on average had expected profit of 77 cents a share on revenue of $2.51 billion, according to Reuters Estimates.
Countrywide also projected profit per share of $3.50 to $4.30 for 2007, down from its January forecast for $3.80 to $4.80. Analysts on average had expected $4.00.
"Turbulent mortgage market conditions had an adverse impact on the company's first quarter," Chief Executive Angelo Mozilo said in a statement.
Pretax profit from mortgage banking sank 82% to $100.3 million, and fell 78% from the fourth quarter. Results were hurt by lower revenue from subprime loan production and write-downs of loans in its portfolio.
Countrywide posted a $69.1 million pretax loss from servicing loans, compared with a $248.7 million year-earlier profit, though its servicing portfolio grew 17% to $1.35 trillion.
The company said it has tightened its lending guidelines, and expects subprime production and investments to be profitable "in subsequent quarters, absent a material worsening of market conditions."
Total mortgage loan production rose 9% to $115 billion. Countrywide said its mortgage industry market share topped 18% in the quarter.
In other areas, Countrywide said pretax profit fell 16% in banking and 15% in capital markets. Insurance profit nearly tripled.
Through Wednesday, they had fallen 11% this year, compared with a 6% decline in the KBW Mortgage Finance Index .