NEW YORK -- Countrywide Financial Corp on Monday ran advertisements seeking to reassure customers it's safe to do business with the company, while a published report said the largest U.S. mortgage lender has begun layoffs to help cope with a credit crunch.
The company ran full-page ads in Monday editions of The New York Times and other newspapers assuring that problems in the mortgage market don't affect the safety of federally insured deposits at its Countrywide Bank unit. It also said the bank is "well capitalized" and that "the future is bright."
Fear about Countrywide's stability grew after the Calabasas, California-based company unexpectedly tapped an entire $11.5 billion credit line to help fund operations.
Customers flocked to Countrywide branches last Thursday and Friday, worried that their money was not safe even with Federal Deposit Insurance Corp backing.
Story Continues Below
The company's shares were downgraded on Monday to "underperform" from "market perform" by Frederick Cannon, a Keefe, Bruyette & Woods Inc. analyst.
Cannon said a loss of thrift deposits poses a "meaningful risk" that could reduce profitability, and that "the likelihood of a dilutive capital raise or a distressed sale" has risen. He said Countrywide can survive without such actions, but will have an "impaired ability" to compete with large bank rivals.
Shares of Countrywide fell $1.59, or 7.4 percent, to $19.84 in afternoon trading on the New York Stock Exchange. They began the year at $42.45.
Like many mortgage lenders, Countrywide has struggled with rising delinquencies and foreclosures, and an unwillingness among bankers to extend credit and among investors to buy loans it makes. Analysts have said difficult market conditions may force Countrywide to reduce mortgage lending.
The Wall Street Journal, citing an internal e-mail, on Monday said Countrywide's Full Spectrum Lending unit has begun laying off an unspecified number of employees.
Full Spectrum offers many "Alt-A" home mortgages, which rank between prime and subprime in quality and often go to borrowers who cannot fully document income or assets.
The unit's sales force on June 30 numbered about 6,785 people, or 38 percent of Countrywide's total sales force of 18,091. Full Spectrum had 228 branches.
Any job cuts would reverse the trend from January to July, when Countrywide added nearly 7,000 employees as weaker rivals fell away. It said it ended July with 61,586 employees.
Countrywide spokesman Rick Simon declined to provide a copy of the e-mail or confirm its contents.
© Reuters 2007. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters.
Editor's note:
Buffett: The best book ever written on investing.
Sir John Templeton Was Right. Get His Latest Insight on Housing and Markets.
The Mother of All Financial Disasters. Act Now.
