Countrywide Financial's chief financial officer believes some subprime lenders will likely go belly up as a result of the current turmoil in the sector, but he stressed Tuesday that the mortgage giant will pull through because of its broader business mix.
Investors seemed to agree, sending shares of Countrywide higher.
"If you're a monoline subprime lender, this is a dark time for you," CFO Eric Sieracki said during a presentation at a Raymond James-sponsored investment conference in Orlando, Fla. "We're a top-conditioned athlete," he added.
Sieracki's comments came as woes at New Century Financialand rival subprime lenders have sent shock waves through Wall Street, although shares of Kansas City, Mo.-based NovaStarFinancial , Irvine, Calif.-based New Century and others rallied sharply on Tuesday following comments from U.S. Treasury Secretary Henry Paulson that he doesn't see the weakened housing market further damaging the U.S. financial sector.
Although Calabasas, Calif.-based Countrywide's 30-day delinquencies for subprime loans have risen to nearly 19% from a range of 12% to 14%, Sieracki pointed out that the subprime business represents only 9% of its loans.
More than 80% of Countrywide's subprime loans are rated A-minus or better, the executive said.
It's also too early to tell if woes in the subprime business will spill over to other products, with fresh data on delinquencies due to come out after March 31.
"This is the pain phase of a healthy cycle," Sieracki said. "We need to see supply leave the system. We've been through these kinds of cycles before and we've seen another day."
He also defended subprime loans in general as part of a way to increase home ownership.
Many of Countrywide's subprime customers end up refinancing into prime mortgages, Sieracki said.