Rare Earnings Miss at Countrywide

But the mortgage lender raises the low end of its full-year guidance.
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Second-quarter profits at mortgage lender

Countywide Financial


fell 28%, as the firm felt the effect of the slowdown in the once red-hot home-loan market.

In the quarter, the California-based lender earned $566 million, or 92 cents a share, compared to $786 million, or $1.29 a share in the year-ago period. Revenue at the big mortgage banker fell 7% to $2.3 billion.

Earnings at Countrywide came in 7 cents below the Thomson Financial consensus estimate. Revenue also fell a bit short of the $2.5 billion figure analysts were expecting.

The earnings miss at Countrywide is a departure from the past few years, when investors could regularly expect the mortgage bank to surpass Wall Street estimates by a wide margin. The firm attributed the lower earnings to a decision to retain a higher percentage of loans it issued in its portfolio.

Earnings at Countrywide were impacted by a 19% decline in revenue from the sale of loans securities, which totaled $1.1 billion in the quarter. The firm also recorded a 15% increase in noninterest expenses to $1.37 billion.

Countrywide increased the bottom range of its full-year earnings guidance to $3.85 a share from $3.60. The firm did not alter the high end, which is $4.60 a share.

Before the revised guidance, analysts were expecting Countrywide to earn between $3.75 and $4.45 a share. The consensus estimate has Countrywide earning $4.21 a share for the full year.

In its earnings release, Countrywide said second-quarter earnings would have been 15 cents a share higher, if it had not held back on selling $9 billion in mortgages into the secondary market.

"Sales of loans generate current-period gains on sale, while the retention of loans is designed to provide a more stable stream of net interest income,'' the company said. "In making the determination of whether to sell or retain loans, management considers .... earnings growth, current market and economic conditions."