IndyMac Bancorp is unwilling to give up the driver's seat, seeing a future driving solo, despite a company forecast that there will be no profit in 2008. But in these trying times, one has to wonder whether IndyMac can really hold out and weather this economic storm alone.
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IndyMac already went back on its word with its announcement of no profit in 2008. In February, the company forecasted it would squeeze out a small profit of $13 million for the current year. The Pasadena, Calif.-mortgage lender tried to put a positive spin on the annual loss prediction, saying losses will decline in each subsequent quarter.
However, hints of trouble in the mortgage industry persist, with IndyMac's bigger peer Countrywide Financial Corp. being downgraded to junk status. Even more frightening is that many more diversified financial institutions in the U.S. such as major Citigroup Inc,. Sovereign Bancorp and Wachovia Corp. have all dipped into selling equity to shore up their balance sheets. IndyMac has said in the past that it too may resort to a capital infusion but an outright merger is out of the question. But with its stock, trading in the $3 range near its 52-week low, an acquirer could certainly make an attractive offer that IndyMac shareholders would have trouble ignoring.
Overall, IndyMac CEO Michael W. Perry is preaching the worst may be over and his company has taken the appropriate precautions in 2007 by getting "the bulk of our credit costs behind us." A loss, however, is still a loss, and the company did report a smaller one of $184.2 million, or $2.27 a share, Monday compared to a previous quarterly loss of $509 million, or $6.43 per share.
Will Indy's shareholders have the patience to wait out a half year of more losses, or will the company be able to stay the course and follow Perry's long range plan of keeping his company independent? - Gerald Magpily
See Dealscape: Will Bank of America be the next to seek capital infusion?
See Dealscape: IndyMac looks to tread alone after first annual loss
See TheStreet.com: IndyMac Sputters to Loss
