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Mortgage Lender's Profit Up Fourfold

October 24, 2003|Roger Vincent | Times Staff Writer

Countrywide Financial Corp. said Thursday that its third-quarter earnings more than quadrupled as the nation's largest independent home mortgage lender continued to benefit from low interest rates and robust refinancing activity.

The better-than-expected performance by the Calabasas-based company was greeted enthusiastically on Wall Street, where Countrywide shares rose $8.77 to $104.43 on the New York Stock Exchange -- a gain of 9% and a record high.

Profit for the quarter ended Sept. 30 rose to $1.1 billion, or $7.70 a share, from $228.5 million, or $1.74 a share, a year earlier. That easily beat the average of $5.28 predicted by analysts polled by Thomson First Call.

Quarterly revenue soared 152% on a year-over-year basisto more than $3 billion as Countrywide's third-quarter lending jumped 98% to $126 billion.

Activity in the quarter was so explosive that profit surpassed that of all of 2002.

However, Countrywide Chairman and Chief Executive Angelo Mozilo said that key factors that led to those record results have changed and that the company was unlikely to earn as much in 2004.

"The current year is quite simply an extraordinary year that is not likely to be repeated," Mozilo said in a conference call with analysts.

Profit will be $16 to $18 a share this year and $12 to $16 in 2004, he said.

The company's previous forecast for 2003 topped out at $15.

The last three-month period was "the perfect quarter" for Countrywide, said analyst Mike McMahon, managing director of Sandler O'Neill & Partners in San Francisco.

The lender caught the last big surge of refinancing business in the pipeline and also managed to turn a profit in its mortgage servicing operations.

Even though profit is expected to dip next year, he said, investors still like the stock because earnings should still be 35% ahead of those in 2002.

Countrywide and other lenders have benefited from falling interest rates that hit bottom this summer.

That spurred a boom in loan applications from home buyers and a frenzy of refinancing applications as homeowners rushed to bring down their monthly mortgage payments. Many homeowners refinanced more than once.

Mortgage rates generally have been rising in recent weeks, and applications to refinance, already well off their summer peak, fell again last week to the lowest level since the end of August, according to the Mortgage Bankers Assn. of America.

Analysts say there could be more interest rate volatility in the near term, which may help lenders as more homeowners seek to refinance and more potential home buyers try to jump in before rates resume their upward trend.

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