Tuesday, October 24, 2006

countrywide conference call

after this report and the call no wonder that all the insiders selling as fast as they can. nach diesem ergebnis kein wunder das alle insider so schnell wie möglich verkaufen
http://immobilienblasen.blogspot.com/2006/10/vote-of-confidence-vertrauensbeweise.html

Countrywide said third-quarter said third-quarter net income for the three months ended Sept. 30 rose 2% to $648 million, or $1.03 a share, from $634 million, or $1.03 a share in the year-ago period. cfc also warns for the full year. of course the stock is up 4%. this action shows you really how the market works these days.

Countrywide Financial cutting 2,500 jobs
Countrywide Financial Corp. is cutting 2,500 jobs in an attempt to save more than $500 million, but executives wouldn't disclose what markets would be hit hardest

http://about.countrywide.com/PressRelease/PressRelease.aspx?rid=920209&ir=yes
details release and conference call.

"Additionally, as previously announced, management is executing a capital optimization plan and the Board of Directors has authorized a share repurchase program of up to $2.5 billion. In connection with this program, the Company intends to repurchase $1 billion to $2 billion of its common stock in the fourth quarter financed through the issuance of high equity-content debt securities.

the perfect point for management to unload more own stocks/idealer zeitpunkt für das management um weitere optionen zu versilbern

for sure the only reason that the stock is in the green/mit sicherheit der einzige grund warum die aktie im plus ist

to put this in perspective: they issue some kind of debt to buy back shares. at least they have spoken with the 3 rating agencies to secure their rating. but how often can you hide a desaster quarter with this kind of financial engeneering. countrywide nimmt in irgendeiner form neues kapital auf um im gleichen umfang neue aktien zu kaufen. immerhin haben sie das mit den ratingagenturen abgesprochen um das rating zu halten. bloß wie oft kann man diese kunststück wiederholen um von den grotten zahlen abzulenken.

mortage banking
Mortgage Banking segment pre-tax earnings declined 40 percent for the quarter and 20 percent for the nine months when compared to the same periods a year ago

Third quarter earnings were lower than the second quarter of 2006 primarily because the MSR and retained interest valuation changes, net of the hedge, represented a loss of $173 million in the third quarter. This compares to a loss of $1 million in the second quarter, a negative swing of $172 million

For the third quarter of 2006, overall gain-on-sale margins as a percentage of loans sold decreased 29 basis points from the prior quarter to 109 basis points

Loan Servicing
Quarterly Loan Servicing sector pre-tax earnings decreased year over year because the valuation changes of MSRs and retained interests, net of the hedge, were a loss of $173 million in the third quarter of 2006, which compares to valuation changes, net of hedge, in the third quarter of 2005 of $16 million -- a negative swing of $189 million.

Delinquencies in the servicing portfolio were 4.50 percent at September 30, 2006, which compares to 4.03 percent at September 30, 2005. Foreclosures in the servicing portfolio were 52 basis points at September 30, 2006, which compares to 42 basis points at September 30, 2005

The weighted average age of the portfolio at September 30, 2006 was 21 months, while the age at September 30, 2005 was 18 months

BANKING
Banking segment quarterly pre-tax earnings increased 33 percent year over year. The increase in earnings for Banking Operations in the third quarter of 2006 was driven by a $14.8 billion increase in interest-earning assets, combined with a 25 basis point increase in the net interest margin (NIM) when compared to the same period a year ago. The NIM of 2.28 percent increased from last year primarily as a result of the reduced impact of teaser rates earned on recently funded loans as fewer pay-option loans were originated in the third quarter of 2006 as opposed to the third quarter of 2005.

The allowance for loan losses was $180 million at September 30, 2006 as compared to $107 million at September 30, 2005.

Delinquencies (90+ days) at September 30, 2006 were 44 basis points, an increase from 11 basis points at September 30, 2005. (plus 400%!, but still in the range of the competitors/immer noch im rahmen der mitbewerber)

other highlights
defaulted mortages loans repurchased from secururitizations $ 1.57b up 14% from december

total loans on balance sheet around $ 84b
total pay option loans $ 35.4b (over 40% of total) ,2005 21.9 b$


pay option loans with negative amortisation principal $ 29.6b (83% of all option arms!/over 35% of total) 2005 7.9 b$

acumulatet neg. arm. (from original loan balance $ 471 mio, 2005 26 mio!


interest defered during the quarter 215 mio up 487%!
interest defered during 9 month 481 mio$ up 790%!
here are other "horror" stats on the capitalized interest
http://immobilienblasen.blogspot.com/2006/10/capitalized-interest-optioan-arms.html

rest of the loan balance
21 b$ hybrids plus other 1st liens
19.7 b$ helocs
plus 8b$ othet assets

cfc is counting on ongoing refinancining.

to counter the faiding option arms cfc wants to expand in
1. reverse mortages
2. builder finance (very cautious/nice timing....)
3.commercial real estate (good luck)

for 2007 the market will trade water with maybe some takeovers.
in 2008 the market will be the "break out year" with exploding business for the stronger players.

lending guidelines: no changes yet. still analyzing......., impact uncertain.........

great pressure in the mbs market in the suprime tranches.

more on the topic buybacks
http://www.autodogmatic.com/index.php/sst/2006/10/06/share_repurchases_can_t_save_this_stock_
http://www.xanga.com/russwinter/540789877/stock-buyback-smoke-and-mirrors.html?nextdate=last
http://immobilienblasen.blogspot.com/2006/08/gewinnqualitt-buyback.html
http://immobilienblasen.blogspot.com/2006/09/pump-up-eps-earningsquality.html

6 Comments:

Anonymous Aaron Krowne said...

This looks like an impending disaster.

So how much of their profit improvement comes from marking neg-am to market, and how much from banking?

What is that banking item anyway? Why did it go up by 33%?

12:06 PM  
Blogger jmf said...

hi aaron,

i´ve updated the banking section.

but you are right. this looks really not so bright.

i could puke when i see this kind of financial transaktion with the debt fueled buyback.

after they said that this was in ok for the rating agencies the stock took off.

good example how the stock market works in days when credit is cheap

12:17 PM  
Anonymous rob said...

Great job covering CFC

2:17 PM  
Anonymous Anonymous said...

CFC's provision was down in the quarter compared to Q1 and Q2. Nobody seems to care.

4:45 AM  
Anonymous Anonymous said...

Great post, JMF, thanks very much! I enjoy reading your blog and comments, and very much appreciate you taking the time to translate from Deutsche to English.

Thanks again,

--Vega

6:55 AM  
Blogger jmf said...

thanks vega for the kind words.

10:51 AM  

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