IStar: credit market deterioration impacts Q2 earnings

(Reuters) - IStar Financial Inc SFI.N, which lends primarily to real estate-related businesses, said it expects to post a second-quarter operating loss, excluding a gain from asset sales, hurt by higher loan loss provisions, mark-to-market impairments and goodwill write-offs.

The New York-based company said it expects to report net income of 5 cents to 15 cents a share. Excluding the gain from asset sales, it expects to post a loss of $1.45 to $1.55 a shares.

Analysts on average expected a profit of 75 cents a share, excluding items, according to Reuters Estimates.

In April, Goldman Sachs said it was concerned about funding risks for commercial lenders that are reliant on capital market liquidity, like CIT Group Inc (CIT.N: Quote, Profile, Research), iStar Financial, NewStar Financial Inc (NEWS.O: Quote, Profile, Research) and CapitalSource Inc CSE.N.

The company expects to set aside about $275 million for bad loans, record about $50 million of impairments and about the same amount in write-offs of goodwill and certain intangibles. It gained about $300 million from asset sales.

Chief Executive Jay Sugarman said, "...we believe it is prudent to increase our provision for loan losses based on our recently completed risk ratings review and on the continued deterioration of the credit markets and overall economy."

The company, which will report final results on July 31, said it currently has about $1.4 billion of cash and available capacity on its credit facilities and is in compliance with all of its bank and bond covenants.

(Reporting by Ratul Ray Chaudhuri in Bangalore; Editing by Bernard Orr)