Countrywide Credit Soars High Above Bank Rivals
Besides eating banks' lunch in the home mortgage market lately, Countrywide Credit Industries has outpaced red-hot bank stocks in the stock market.
Investors have flocked to Countrywide, the nation's only major independent mortgage banking company, because of its ability to capitalize on the mortgage refinancing boom sparked by declining interest rates.
Countrywide's shares have skyrocketed from $9.25 at year-end to nearly $25 recently, a 165% gain, before easing last week in a declining stock market. No bank or thrift among the 50 largest has matched Countrywide's appreciation this year. Only Fleet/Norstar has appreciated more than 100%.
Analysts view the enthusiastic market response as a sign of investors' willingness to pay up for financial stocks where there is little credit risk. They see this as encouraging for banks that are further advanced in putting their lending portfolios in order.
Gaining Market Share
The Pasadena, Calif., mortgage lender has "benefited from the weakened condition of many of its competitors, both savings and loans and other mortgage bankers, and has gained market share," said David S. Hochstim, thrift industry analyst at Bear, Stearns & Co.
Monday, however, Countrywide's shares closed at $20.25, off $1.25, in what analysts described as profit taking.
Karen Carnohan, investor relations spokeswoman for Countrywide, attributed recent weakness in its stock to investor worries about the prospect of rising interest rates. But she said the company has seen no slowdown in refinancing activity in the mortgage market.
Banks Restricted Credit
Banks themselves have played no small part in Countrywide's success - by closing the credit spigot for borrowers viewed as less than top-drawer credits.
"Because only single- or double-A credits can get bank credit these days, many smaller mortgage bankers couldn't fund their loan pipeline and went out of business," noted Bruce W. Harting, thrift industry analyst at Salomon Brothers Inc.
Countrywide's mortgage origination volume in May was $730 million. Last year, by comparison, its originations averaged about $400 million monthly, and it ranked 10th among the nation's lenders with a total of $4.3 billion.
PHOTO : The Rise and Fall of Countrywide Shares