Countrywide Posts Loss; B of a Says Merger a 'Go'
NEW YORK (Reuters) - Countrywide Financial Corp CFC.N, the mortgage lender being acquired by Bank of America Corp (BAC.N), posted a larger-than-expected $421.9 million quarterly loss on Tuesday as more homeowners fell behind on payments.
Shares of Countrywide, the largest U.S. mortgage lender, nevertheless rose as much as 8.6 percent as worries eased that the $4.3 billion takeover might fall apart.
Countrywide's fourth-quarter loss was 79 cents per share, compared with a year-earlier profit of $621.6 million, or $1.01 per share. Analysts on average expected a loss of 32 cents per share, according to Reuters Estimates. Countrywide had on Oct. 26 projected a profit of 25 cents to 75 cents per share.
The loss was 65 percent smaller than the $1.2 billion that Countrywide lost in the third quarter.
Bank of America Chief Executive Kenneth Lewis said the results met his expectations when the second-largest U.S. bank agreed on Jan. 11 to buy Calabasas, California-based Countrywide for $7.16 per share.
By Monday, Countrywide shares had fallen 17 percent below that price on concern that Charlotte, North Carolina-based Bank of America might try to renegotiate or cancel the merger.
"Everything is a go to complete this transaction," Lewis said at a Citigroup Inc financial services conference. "Items driving the loss were consistent with our due diligence and (the) transaction price." Lewis also said results reflected dramatic improvement in mortgage business fundamentals.
A third-quarter closing for the takeover of Countrywide is expected. The combined company would make about one in four U.S. home loans.
"We believe B of A has consistently envisioned reaching the mountaintop in mortgages, which while solidly out of favor, in our view still remains a core relationship product for the leading retail bank," analysts at CreditSights Inc wrote.
In afternoon trading, Countrywide shares were up 38 cents, or 6.4 percent, at $6.33 after earlier rising to $6.46. Bank of America shares were up 66 cents, or 1.6 percent, to $41.86. One year ago, Countrywide shares closed at $43.38.
ONE IN THREE SUBPRIME PAYMENTS LATE
Countrywide, which collects payments on $1.48 trillion of mortgages, said more than one in three borrowers with subprime home loans were behind on payments at year-end.
The 33.64 percent delinquency rate was up from 29.08 percent at the end of September. Late payments also rose on traditional mortgages and home equity loans.
Countrywide set aside $907 million for bad loans, up from $70.8 million a year earlier, and wrote down $831 million for prime home equity loans.
It also took a $394 million loss as it reclassified $7 billion of jumbo mortgages as loans it holds for investment. Loan volume fell 44 percent to $69.2 billion. Continued...
Sister speaks to jailed journalist
