IndyMac Bancorp Inc. posted a bigger-than-expected third-quarter loss on Tuesday, but shares in the company shot up on an optimistic outlook.
IndyMac of Pasadena posted a loss of $203 million (-$2.77 per share), compared with net income of $86 million ($1.19) from the same period a year earlier. The loss was five times more than IndyMac predicted just two months ago. Analysts polled by Thomson Financial saw a loss of 46 cents per share for the quarter.
The latest results included $408 million in pretax credit costs and a $167 million pretax loss on the sale of loans and mortgage-backed securities. Much of those losses resulted from the company's change in strategy to shift away from being a subprime lender.
"We are not down and out," the company's Chief Executive Mike Perry said in a statement, adding that the company should be profitable within the next five quarters.
Investors may have been inspired by the lender increasing its credit reserves by $441 million, or 47 percent, in the third quarter, to give it a total of $1.4 billion. The loss reserves are used to pay of bad loans that are written off. IndyMac's charge-offs rose to $146 million in the third quarter.
"We are clearly disappointed with this quarter's results, which were driven by deteriorating mortgage delinquencies and a declining housing market combined with an unprecedented collapse in the secondary market," Perry added in a statement.
The latest quarter's results were also hurt by $28 million, or 23 cents per share, related to severance costs after the company cut 1,550 jobs during the quarter.
Nonetheless, investors seem optimistic in the company, sending shares up 13 percent in early trading to $14.40. Shares have plunged more than 70 percent so far this year.
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