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What Does the Future Hold For Countrywide?
By JLP | January 8, 2008
Check this out:
You’re looking at the one year chart for Countrywide Financial (CFC). It’s not a pretty site. It has gone from over $45 per share to $5.47 (today’s closing price) over the last year. Today alone it dropped over 18% on fears that it might go into bankruptcy. The company denies this but what else do you expect them to say? “Uh yeah, we’re planning to file for bankruptcy.” That’s not gonna happen.
Take a look at their pre-tax earnings for the 9-month period that ended on September 30, 2007:
In case you were wondering, Loan Production* means:
- The Retail Channel sources mortgage loans primarily from consumers through the Company’s retail branch network, call centers and the Internet , as well as through real estate agents and homebuilders.
- The Wholesale Lending Channel sources mortgage loans primarily from mortgage brokers.
- The Correspondent Lending Channel purchases mortgage loans from other mortgage lenders, including financial institutions, commercial banks, savings and loan associations, home builders and credit unions.
- Countrywide Bank, FSB sources loans from the three channels above and funds them at the Bank. These loans are then sold into the secondary markets.
What’s really troubling is the fact that those numbers are from BEFORE the carnage that occured during the third fourth quarter of 2007! I bet those numbers will look a lot worse the next time they are reported.
So, what do you think? Do you think Countrywide is going to file for bankruptcy or do you think another company will come along and bail them out? If I were a betting man, I would say they are going down.
DISCLAIMER: I’m not a stock jockey, only an observer. I do not own any shares of CFC nor am I short CFC shares.
Related: CNNMoney.com – Countrywide Shares Take Another Hit
*Source: Countrywide Financial
Topics: Housing Market, Mortgages | 9 Comments »
January 8th, 2008 at 6:08 pm
And I just opened a Country Wide Bank account for the 5.25%, might be time to reconsider moving too much money into it. It is FDIC insured, but that could mean months of no interst if something catastrophic occurs.
January 8th, 2008 at 7:13 pm
You shouldn’t worry about your money in any FDIC institution even if it goes under or gets taken over. Your money is protected per the guidelines. Don’t fret, just sit back and enjoy the higher savings rates lately.
January 8th, 2008 at 9:31 pm
I was planning to open an account with them but a local bank had a promotion for a similar rate. A friend of mine has accounts with them.
Now I get suspicious about any bank that offers higher-than-average rate…
Not sure about Countrywide. After I looked at the news today I thought – should I be contrarian and gamble a small amount of money on their stock, kind of “entertainment money”, but decided I wouldn’t get even $500 worth of entertainment. If someone bails them out, I might regret it. I am just not a gambling person, though.
Forgetting about Countrywide for a moment. When do you guys think might be a good time to start looking at bargains among financial stocks again?
January 8th, 2008 at 11:26 pm
I saw a beatle lieing on its back on the sidewalk under a large tree back in October. It’s legs were moving and its back shell was so large, shaped like a helmet, so that this beatle had no chance of righting itself. It reminded me of a turtle, but without any kind of neck or head which could get even close to the concrete. I thought this beatle represented countrywide. It’s equity in piggy back loans is so weighty, it cannot right itself. How many other heavily laden CDO bearing critters will end up on their backs, with no means to right themselves? It will only take this winter as the leaves come off the trees for these critters to find themselves in the same fate that countrywide suffers. I left that bug alone, food for a bird.
January 9th, 2008 at 8:40 am
I also invested money in countrywide CDs. Since it is FDIC insured, I am not worried about getting my money back. Still, just to clarify, the guidelines that you speak of JS will still allow me to earn the monthly interest, right?
January 9th, 2008 at 9:25 am
I was a CFS shareholder years ago when I was an admirer of their growth, service and dividends.
This changed when I was reading a quarterly earnings statement outlining how CEO Angelo Mozilo was forgoing retirement, but the board decided to give him his $9 Mill retirement package anyway and then voted him another $9M retirement package when he decided to retire again. This boosted his total comp package for 2005 to around $57 Million. Oh, and by the way we missed our quarterly earning expectation. Better luck next quarter.
This triggered what I call the DCOE factor: the Doushe Bag Chief Executive Officer. I sold the stock (for a decent profit) and haven’t looked at them since.
January 9th, 2008 at 9:45 am
One false statement in your comments: 9 months results ending on September 30, 2007 includes Q3 2007, they are not “from BEFORE the carnage that occured during the third quarter of 2007!” That is a purely false statement you have made.
January 9th, 2008 at 9:57 am
GRBerry,
Thanks for the catch. I meant FOURTH quarter! I made the correction.
January 9th, 2008 at 11:08 am
I agree with JS> Countrywide is paying such great deposit rates because they need cash. Now that investors are no longer interested in MBS (mortgage backed securities) Countrywide has a liquidity problem on top of the default/bankruptcy problem. Take advangate of their capital budgeting crisis and enjoy the higher rates (just don’t deposit more than the FDIC limit of $100k for non-qualified money and $250k for qualified).