IndyMac loss dwarfs own forecast

By Jonathan Stempel

NEW YORK (Reuters) - IndyMac Bancorp Inc IMB.N, one of the largest independent U.S. mortgage lenders, posted a quarterly loss on Tuesday that was more than five times larger than it had projected, hurt by mounting delinquencies and a collapse in demand to buy its home loans.

The parent of IndyMac Bank, one of the largest U.S. savings and loans, halved its dividend and said another cut is possible if it loses more money. It also quadrupled its reserves for bad loans.

"It's going to be a tough year, year and a half," Chief Executive Michael Perry said on a conference call.

The third-quarter net loss for Pasadena, California-based IndyMac totaled $202.7 million, or $2.77 per share. It was the first quarterly loss since the fourth quarter of 1998. Profit a year earlier was $86.2 million, or $1.19 per share.

Excluding items, the loss was $2.74 per share -- six times the average analyst forecast, according to Reuters Estimates, of a loss of 46 cents. IndyMac had on September 7 forecast a loss of nil to 50 cents per share.

"Conditions in mortgage markets are deteriorating so rapidly that management guidance often becomes obsolete nearly as soon as they publish or report it," wrote Lehman Brothers Inc. analyst Bruce Harting. "IndyMac demonstrates the point."

He rates IndyMac "underweight," but said its $1.3 billion capital cushion appears sufficient to weather six quarters like the third quarter before regulators become concerned.

Countrywide Financial Corp CFC.N and GMAC's Residential Capital LLC, the largest U.S. mortgage lenders not owned by banks, also reported big quarterly losses. Countrywide lost $1.2 billion, and ResCap lost $2.26 billion.

Shares of IndyMac rose as much as 14.7 percent on Tuesday on optimism the company could survive the housing slump, before falling back. In afternoon trading, they were off 2 cents at $12.75 on the New York Stock Exchange. They began the year at $45.16.

TESTED LIKE NEVER BEFORE

Pretax credit losses quadrupled from the second quarter to $407.7 million. Losses from the sale of mortgages totaled $167.2 million. Results also reflected costs to eliminate 1,547 jobs, as well as hedging gains.

"I expect more reserves will be needed," said Gary Gordon, an analyst at Portales Partners in New York who has a "hold" rating on IndyMac.

"At the margin the main negative is loans to home builders," he added. "Three percent were delinquent at the end of June, and they're expecting 30 percent by the end of the year. It makes sense that it's happening, but it's dramatically different from what they had been saying."

IndyMac used to specialize in "Alt-A" home loans, which often go to people who can't fully document income or assets.

As investors stopped buying such loans, IndyMac transformed itself to emphasize smaller loans that government-sponsored enterprises Fannie Mae (FNM.N) and Freddie Mac (FRE.N) will buy. Countrywide did the same.