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Mortgage Giant's Earnings Double

Countrywide Financial benefits from surge in refinancings as profit rises to $383 million.

July 23, 2003|Nancy Rivera Brooks | Times Staff Writer

Riding the biggest wave of home financing in American history, Countrywide Financial Corp. said Tuesday that second-quarter profit doubled as the company funded $130 billion worth of mortgages.

Amid a flurry of eye-popping numbers, one stuck out in particular: Countrywide made an average of 29 home loans every minute of every working day in June.

Although the refinancing bonanza is quickly fading, Countrywide Chief Executive Angelo R. Mozilo said the coming quarters would be even more profitable because of the large number of loans awaiting funding and the fast-growing portfolio of loans that Countrywide services.

Countrywide's stock price jumped $4.60, or 7%, to $70.32 on the New York Stock Exchange.

The Calabasas-based company, the nation's third-largest mortgage lender, said net income soared to $383 million, or $2.74 a share, from $191 million, or $1.48, a year earlier, aided by the lowest interest rates since the Eisenhower administration.

Revenue rose 74% to $1.74 billion.

Countrywide funded $130 billion in loans during the second quarter, up from $102 billion in the first quarter and $42 billion in the second quarter of 2002. Countrywide's servicing portfolio grew to $559 billion, up more than $100 million since the beginning of the year.

"It was an absolutely awesome quarter," said Charlotte Chamberlain, an analyst with Jefferies & Co., who maintains a "buy" recommendation on Countrywide, owns none of the stock and does no investment banking with the company. "The question that inquiring analysts want to know is, what is the company going to do for an encore?"

Mozilo predicted that profit in the second half of the year would top the $709 million earned in the first half. Countrywide on Tuesday projected 2003 earnings at $13 to $15 a share, more than twice the profit earned last year and better than the $10.76 average of analysts polled by Thomson First Call, a Boston-based earnings tracking firm.

Analyst Mike McMahon of Sandler O'Neill & Partners said the recent increase in mortgage rates was reflected in a decline in Countrywide's daily loan-application volume to $2.5 billion per day in July from $3.2 billion in June.

"The refinancing bubble has begun to deflate, but it does not appear that it's going to deflate rapidly" as undecided borrowers race to lock in rates before they move even higher, said McMahon, who has a "buy" recommendation on the stock, which he does not own. Sandler O'Neill & Partners has no investment banking relationship with Countrywide.

Because Countrywide makes money from mortgages in two ways -- by lending money and by servicing its portfolio of existing mortgages -- the company stands to profit whether interest rates are falling or rising, McMahon said.

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