By Jonathan Stempel

NEW YORK (Reuters) - IndyMac Bancorp Inc IMB.N, posted a $509.1 million fourth-quarter loss and suspended its dividend indefinitely on Tuesday, but expects to be profitable sooner than expected as it recovers from soaring mortgage losses caused by the U.S. housing slump.

The shares of the second largest publicly traded, independent U.S. mortgage lender rose $1.10, or 14.5 percent, to $8.70 in afternoon trading. IndyMac expects to turn a profit in the second quarter after last month forecasting a return to profitability in the second half.

Through Monday, IndyMac shares had fallen 79 percent in the previous year, as analysts questioned whether the company could survive on its own.

"2007 was a terrible year for our industry," Chief Executive Michael Perry said in a letter to shareholders. "Innovative home lending went too far. ... All home lenders, including IndyMac, were a part of the problem, and, as IndyMac's CEO, I take full responsibility for the mistakes that we made."

The net loss for the Pasadena, California-based parent of IndyMac Bank equaled $6.43 per share and compared with a profit of $72.2 million, or 97 cents, a year earlier.

Analysts on average expected a loss of $1.38 per share, according to Reuters Estimates. IndyMac set aside $2.38 billion for bad loans, quadruple its year-earlier reserves, and up 71 percent from the end of September.

For all of 2007, IndyMac lost $614.8 million, or $8.28 per share, the first annual loss in its 23-year history. IndyMac plans to boost capital by $400 million in 2008 by shrinking its balance sheet, and said eliminating its 25 cent per share quarterly dividend will save $81 million a year.

The losses shows how the nation's housing slump has extended past subprime mortgages into the medium- and higher- quality loans in which IndyMac long specialized.