IndyMac Shares Tumble on Solvency Concerns
With competitor Countrywide Financial Corp. (CFC) set to disappear into the hallways of North Carolina-based Bank of America Corp. (BAC) in the next week, the mantle of "largest independent mortgage company" is set to fall to Pasadena, Calif.-based IndyMac Bancorp Inc. (IMB). And already, IndyMac is seeing scrutiny over its own future. The latest comes in the form of a leaked letter from Senator Charles Schumer (D-NY) Thursday afternoon, sent to federal regulators, that questioned the financial health of the bank amid a mortgage mess that has yet to show signs of repair. The Wall Street Journal, which originally reported on the letter's contents, said Schumer wrote that he was "concerned that IndyMac's financial deterioration poses significant risks to both taxpayers and borrowers and that the regulatory community may not be prepared to take measures that would help prevent the collapse of IndyMac or minimize the damage should such a failure occur." IndyMac shares closed at just $.80 on the New York Stock Exchange Thursday, down from $1.08 Wednesday; shares were up slightly to $.82 Friday morning when this story was published. Concerns over the bank's future are a far cry from the exuberance exhibited by CEO Michael Perry in very early May, who said then that "we have turned a corner and that our business is improving." The bullish comments temporarily boosted stock prices at the lender; but not long after that point, IndyMac posted a $184.2 million loss for the first quarter, and warned it likely wouldn't be profitable in 2008. Shortly thereafter, in mid-May, Fitch Ratings cut its core credit ratings on the bank for the second time this year, moving the troubled lender further into junk territory over concerns about the bank’s "ability to manage capital." Perry told the Journal that IndyMac was "working hard" to raise capital, but did not provide further details. Disclosure: The author was long CFC, and held no positions in IMB or BAC, when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.