IndyMac Sinks on Capital Shortage, $0 Price Target

IndyMac Bancorp shares fell by more than 40 percent on Tuesday, a day after the large California mortgage specialist said it doesn't have enough capital and will stop offering most home loans, and an analyst said shareholders may be wiped out.

Paul Miller, a Friedman, Billings, Ramsey analyst, cut his price target for Pasadena, California-based IndyMac to zero per share from $1.00.

"Given continued home price declines, management's higher loss estimates, recent ratings agency downgrades on the company's mortgage-backed securities and the company's decision to stop new mortgage originations, we do not believe that there is any value left for common shareholders," Miller wrote.

"We are not predicting IndyMac's failure, but we expect that the value of the common equity left after (Monday's) announced actions will be immaterial," he added.

IndyMac , the largest independent, publicly-traded U.S. mortgage lender, said on Monday it will slash 3,800 jobs, or 53 percent, and stop accepting most mortgage loan applications.

It plans to keep offering "reverse" mortgages to older borrowers, and operate 33 retail branches in southern California.

The company also said it has been unable to raise new capital, and expects a larger loss in the second quarter than the $184.2 million loss it posted from January to March.

Regulators also increased their scrutiny after concluding IndyMac was no longer well-capitalized.

IndyMac has about $1.7 billion of operating liquidity, a regulatory filing shows.

IndyMac is one of the largest U.S. lenders to curb or halt its main business as a result of the nation's housing slump and credit crisis.

Countrywide Financial, once the largest U.S. mortgage lender, avoided possible collapse when it was acquired last week by Bank of America .

IndyMac said it has $18 billion of deposits, of which more than 96 percent are insured by the Federal Deposit Insurance Corp.

Customers withdrew about $100 million of deposits late last month after Sen. Charles Schumer, a New York Democrat, raised questions to regulators about whether IndyMac could survive.

Shares of IndyMac fell 30 cents, or 42.3 percent, to 41 cents in morning trading.

Their 52-week high is $31.32, set last July 9.