Los Angeles – The infusion of $2 billion from Bank of America Corp. should help shore up sagging Countrywide Financial Corp. as it tries to outlast the credit crunch squeezing Wall Street and the mortgage industry, analysts said Thursday.
The deal, disclosed late Wednesday, gives the nation’s largest mortgage lender breathing room as it tries to navigate the U.S. housing downturn.
“We believe this investment in Countrywide will spark a rally in the residential mortgage finance sector,” Stephen Laws, a Deutsche Bank analyst, wrote in a research note.
Still, analyst Paul Miller Jr. with Friedman Billings Ramsey noted that “Countrywide is not completely out of the woods.”
Despite the boost in capital, Countrywide is likely to have a tough time staying profitable given the overall bleak housing forecast, as home values fall and adjustable mortgages reset and raise the specter of more defaults, concluded Chris Brend ler, an analyst with Stifel Nicolaus & Co. Inc.
The Bank of America deal helped boost shares of Countrywide as high as $24.46 on Thursday. The stock ended up gaining 20 cents to close at $22.02. A week earlier, the stock hit a 52-week low of $15.
Bank of America shares rose 18 cents to $51.83.
Countrywide chairman and chief executive Angelo Mozilo said in a statement Wednesday that the Bank of America investment would help position the company for growth.
He told CNBC on Thursday that Countrywide’s balance sheet needs to be stronger but added, “there is no more chance for bankruptcy today for Countrywide than there was six months ago, a year ago, two years ago and when the stock was $45 a share.”
The executive also said he believes the housing slump, marked by increasing delinquencies and foreclosures, will trigger a national recession.
