An update to yesterday’s story about IndyMac:
Beleaguered bank IndyMac has had its price target cut to $0 from $1 after the company said that second quarter losses will be bigger than the $900 million loss racked up in the first quarter. Analysts at Friedman Billings Ramsay are not saying that the company will fail per se, just that there is no value left for shareholders. The stock last traded at around 70 cents.
This glum view was also fueled by news that the bank will fire half its employees and that it has been unable to raise additional capital. According to a Bloomberg report, the California- based lender was told by regulators that it is no longer “well capitalized.” IndyMac was the second-largest independent U.S. mortgage lender last year after Countrywide Financial, now owned by Bank of America (BAC).
“The big problem is that no one will give them money. There’s too much risk involved and not enough value in their franchise,” Jason Arnold, an analyst at RBC Capital Markets, told Bloomberg.
Soooo… the company’s stock has cratered to the point that it looks to be worthless, yet the company won’t have failed. Depends on your point of view… if I were a stockholder in IndyMac, I’d say it’s failed.
This won’t be the last major bank to approach the Wall Street confessional, folks. There’s too much bad news churning around out there. I have no idea which bank will be next, or when that will happen, but there are other major holders of repackaged crap out there that will have to come clean sooner or later. My unscientific rule is that the higher an interest rate a bank is advertising for savings accounts, the uglier their reserve position is.