NDE: IndyMac Bank Still Feeling Mortgage Pain
Large Cap Watch List (Track at Marketocracy) member IndyMac Bank (NDE - Annual Report) revised its guidance in the CEO’s letter to shareholders:
Even with these measures, 2007 will likely be a down year for our EPS, although our ROE should still be solid, in a broad range of 10 percent to 15 percent. Factored into this forecast is a continuation of tough conditions for loan originations, credit performance and in the secondary market. Our more detailed internal forecast shows that our ROEs for the early quarters of the year will be at the low end of the range above; however, during the second half of the year, if we execute on our plans as we expect, and with a little luck, our ROEs could be at or even somewhat above the high end of the range. With all of that said, if market conditions deteriorate significantly from what we are forecasting today … which is always a possibility … there could be some downside to the above ROE range.
According to an Associated Press article:
In January, the company forecast 2007 earnings at about $4.15 per share. At the time Wall Street was looking for profit of more than $5 per share, but analysts have since revised their estimates and now expect, on average, profit of $4.32 per share.
IndyMac did not specify a per-share earnings target on Thursday.
But that is not quite true. The 10-15% ROE range, applied to IndyMac’s $2.0 billion in equity, implies a net income range between $200 and $300 million, or roughly $2.75 – $4.00 per share.
A lot can change in a little more than a month.
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It would be interesting to know where the $300m share buyback announced in January stands and what impact that will have on per share earnings.
Now that the stock is totally trashed, they should be able to really get their money’s worth.
They are presenting at two investor conferences on March 7. FWIIW, I predict a pop in the stock price after those events.
Good point. It will be interesting both to see whether they go through with it and how much they end up paying.
[...] 3. We do not rank among the top 25 subprime lenders in the country in any current industry survey, nor are we part of the ABX Index of the top 20 subprime issuers. 4. Subprime mortgages generally include those loans where the borrower’s FICO score is 620 or below. In contrast the averageFICO score on Indymac’s 2006 loan production was 701. Of course, one can forgive the confusion with the shares down by a third since the beginning of the year and the company having to frequently cut its guidance, as we reported two weeks ago: According to an Associated Press article: In January, the company forecast 2007 earnings at about $4.15 per share. At the time Wall Street was looking for profit of more than $5 per share, but analysts have since revised their estimates and now expect, on average, profit of $4.32 per share. [...]
Because of the profit levels involved it’s always going to be a somewhat predatory industry. The business of money can be so lucrative that sharp practices are almost inevitable. The really hard sell that has been going on in the sub-prime market over the last few years was always going to have some fairly serious ramifications.
I run a mortgage site and I always try to point out the potential pitfalls to people but the desire to own a home can be an overwhelming one and I think a correction in the market (particularly in the sub-prime sector) was always inevitable.