IndyMac CEO tells investors the gloom is overblown
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IndyMac Bancorp CEO Michael Perry came out swinging today against Wall Street’s increasingly dim view of the mortgage lender’s future, and that has given the stock a pop.
In a filing with the Securities and Exchange Commission, the Pasadena-based company first delivered some bad news: Its chief financial officer, Scott Keys, is taking a medical leave of absence. Perry said Keys’ departure ‘clearly presents us with some logistic challenges’ ahead of the company’s plan to report first-quarter results on May 12. But he said the company would meet that reporting date.
Included in the filing was a defense of IndyMac’s financial health in the wake of the plunge in its shares to 18-year lows this month. ‘Given the decline in our stock price, some people have questioned Indymac’s survivability in the current environment,’ Perry said. ‘I am here to tell you that I believe we have turned a corner and that our business is improving.’
He said the company’s first-quarter loss would be down ‘roughly 50% to 65%’ from the fourth-quarter loss, and that ‘our forecasts show continued declines in credit costs and in our overall losses each quarter for the remainder of the year.’
IndyMac has shifted away from its previous bread-and-butter -- so-called alt-A loans -- to loans it can sell to government agencies. ‘We are now achieving profitability with this new production model, with all of our 9 regional wholesale centers and 104 of our 152 retail lending branches being profitable in March,’ Perry said.
Like many lenders, IndyMac sold many of its worst loans to Wall Street. And the bank has set aside significant reserves to cover losses on loans it holds or loans that investors force back to it. The question is whether those reserves will be enough, given the housing market’s continuing slide.
Analyst Eric Wasserstrom at brokerage UBS said in a note to clients today that he still doesn’t believe IndyMac will be profitable in 2008, ‘as we expect that credit will continue to deteriorate at an accelerated rate, necessitating additional reserving and impairment charges.’
Perry is insisting the bank has ample capital and will get through this. The stock market has had severe doubts, but today the shares are getting a bounce, up 77 cents, or 24%, to $4.02 at about 12:40 p.m. PDT, in very active trading. Given the heavy short-selling of the stock, some of those bears may be covering their positions today.
Posted May 1, 2008