Countrywide posts 1.2 billion dollar loss as result of subprime mortgage mess

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Countrywide posted its first operating loss in 25 years today, reporting a quarterly loss of $1.2 billion related to subprime mortgage losses and restructuring charges. The company stock surged more than 15% after the announcement as Countrywide stood by their stockholder dividend and forecast a profit in the 4th quarter. From Market Watch:

“Countrywide’s results for the third quarter of 2007 reflect the impact of unprecedented disruptions in the U.S. mortgage market and the global capital markets, as well as continued weakening in the housing market,” said Chief Executive Angelo Mozilo in a statement.

However, the CEO said the company believes it can weather the credit storm as it “stabilized its liquidity, strengthened its capital position, significantly tightened its loan program and underwriting guidelines, and began the process of right-sizing operations for today’s lower volume mortgage market.”

We view the third quarter of 2007 as an earnings trough, and anticipate that the company will be profitable in the fourth quarter and in 2008,” [Countrywide President] Sambol said.

“Countrywide moved decisively in the quarter to reorient its business model and credit exposure to the new realities of the market,” wrote analysts at Fox-Pitt Kelton Cochran Caronia Waller in a research note. “This should position it well once the mortgage market begins to recover, as it inevitably will.”

This leads me to the following analogy. Have you ever seen Rocky IV? It’s a classic Rocky film, one of my favorites. It is Rocky vs. Ivan Drago (a Russian steroid fiend) and Rocky gets pummeled in the first rounds but survives to fight until the end (he wins of course). It reminds me of Countrywide – getting hammered in August and again this week only to escape narrowly to the next round. My only fear? That Drago (the embodiment of bad loans) will come out swinging as more option arms reset and in this version Rocky (our friend Angelo) may not be able to withstand the punishment.

Here’s the ultimate fight sequence of the fight, with of course Rocky victorious. A little Friday entertainment courtesy of our friend Sly Stallone.