Countrywide Financial Corp. reported third-quarter net income of $648 million ($1.03 a share), up 2 percent from $634 million from the same period a year earlier. Analysts were expecting around $1.08 on average, according to Thompson Financial.
Revenues for the Calabasas-based mortgage company were up 4 percent to $2.8 billion, but expenses were also up 8 percent to $1.79 billion. Chief Executive Angelo Mozilo pointed to a shriveling housing market, which in August saw the first drop in home prices in 11 years, as well as 17 consecutive hikes in interest rates as causes for the company’s slower performance. Mozilo said that he is responding by cutting 2,500 jobs, about 4 percent of the workforce, as part of a $500 million cost-cutting effort to help the company weather a cooling in demand for new mortgages, which declined 22 percent for the quarter. Most of the cuts will happen in the fourth quarter.
“We anticipate the fourth quarter of 2006 will be characterized by a continued slowdown in purchase volume beyond typical seasonality,” Mozilo said in the statement. “However, should interest rates remain at their current levels or move lower, we expect that increased refinance activity will mitigate this decline.”
The mortgage lender also reported mortgage-banking profit of $424 million, a 40 percent dip from the same period a year earlier.
These earnings are anything but a surprise and come a month after Mozilo announced that he was going to stay on as head of the mortgage lender despite saying publicly he was going to retire this December a move many analysts saw as the 67-year old digging in to guide the company he co-founded through a rough time.
Investors apparently were reassured by Mozilo, with Countrywide shares closed up $2.12 Tuesday to $37.33.