Countrywide Earnings Surge; Shares Up 8.7%

Countrywide Financial Corp. said Tuesday that its first-quarter earnings nearly doubled as the nation’s largest independent home mortgage lender benefited from low interest rates and robust refinancing activity.

The better-than-expected performance by the Calabasas-based company was greeted enthusiastically on Wall Street, where Countrywide shares rose $5.41 to $67.83 on the New York Stock Exchange -- a gain of 8.7% and new 52-week high.

Countrywide also hiked its dividend and issued an annual profit projection that outstripped analysts’ previous estimates, in a sign that home sales and mortgage refinancings -- which had been expected to taper off this year -- will remain strong.

“They are just not seeing any drop-off in demand,” said industry analyst Erik Eisenstein at Standard & Poor’s Corp. The remainder of the year “is looking very strong.”

Profit for the January-March quarter rose to $326 million, or $2.44 a share, from $168 million, or $1.32, in the year-ago period. Quarterly revenue soared 69% on a year-over-year basis to $1.54 billion.

The company funded $102 billion in loans during the quarter, more than double last year’s volume. It ended the quarter with $59 billion in loans in process, or $10 billion more than what was in its pipeline at the end of December, the company said.

Countrywide gained ground on competitors, expanding its share of all purchase loans to 11% from 8% in the year-ago quarter. In addition, the company’s banking, insurance and other non-mortgage operations continued to grow, generating pretax earnings of $170 million, more than double last year’s results.

But the main reason for the company’s stellar first-quarter results was gushing demand for mortgage refinancings, which accounted for more than 75% of the loans Countrywide made during the period. Countrywide’s refinancing volume -- which also includes home-equity loans -- soared to $78.5 billion from $28.5 billion in the year-ago quarter.

Industry analysts have been forecasting a significant drop in refinancing activity from last year’s record level, on the assumption that mortgage rates eventually would start to rise. During the first quarter, however, rates fell to their lowest in about 40 years and have risen only modestly since then. The average for a 30-year, fixed-rate mortgage sank to 5.61% in mid-March, according to a weekly survey by Freddie Mac. Last week the average rate was 5.79%.

Countrywide Chairman and Chief Executive Angelo R. Mozilo said the company’s ongoing diversification efforts and growing loan-servicing business would help offset an expected drop in refinancings when mortgage rates begin to climb substantially.

For now, the company’s expectations for the rest of the year are bullish. Mozilo said Countrywide is projecting this year’s annual profit at $10 to $11 a share, up sharply from last year’s $6.49 and higher than analysts’ previous estimates.

Countrywide’s board increased the cash dividend on common stock to 13 cents a share from 12 cents for the first quarter to shareholders of record May 14.