IndyMac tempers optimistic view

IndyMac (IMB) is showing that turning the corner isn’t all it’s cracked up to be. The Pasadena, Calif.-based lender posted a first-quarter loss Monday, as the bank took another big hit to its bottom line to add to its reserves for future loan losses. IndyMac lost $184 million, or $2.27 a share, compared with the year-ago $52 million, or 70 cents a share. Credit provisions and costs were $249 million in the latest quarter, which IndyMac chief Mike Perry noted represents a 71% drop from the fourth-quarter level. Perry said that decline shows IndyMac “took the appropriate steps in the second half of last year to get the bulk of our credit costs behind us.”

But IndyMac also said it can’t tell when U.S. house prices will slow their decline, and said it won’t be able to predict a return to profitablity until they do. Until then, its first priority is to build capital - which is why IndyMac is deferring interest payments on holding company trust preferred securities, and suspending dividend payouts on bank non-cumulative, perpetual preferred stock.

“With these actions and with declining quarterly losses,” Perry wrote, “we forecast that our capital ratios will improve throughout the remainder of the year and that we should remain well-capitalized throughout this crisis, although we can make no guarantees that that will be the case.”

The remarks come just over a week after Perry set off a sharp rally in IndyMac’s beaten-down shares by saying the company had “turned a corner.” Perry reiterated those comments Monday, but he also indicated the company faces a long road to recovery. IndyMac shares dropped 7%, giving back the last of the gains they made back on May Day.