NEW YORK (Reuters) - Standard & Poor’s on Wednesday slashed its ratings on IndyMac Bancorp Inc IMB.N deeper into junk, citing the mortgage lender’s mounting nonperforming assets and impaired creditworthiness.
S&P cut IndyMac’s counterparty credit risk rating to “CCC,” just a few steps above default, from “B,” the fifth highest junk level, and said it may cut them again.
“We took this action because we believe that IndyMac’s weakened financial profile and exposure to deteriorating housing markets leaves its creditworthiness severely impaired,” S&P analyst Robert Hoban Jr. said in a report.
IndyMac, the largest independent publicly traded U.S. mortgage lender, said on Tuesday that depositors had been withdrawing cash at an “elevated” pace since a key U.S. senator questioned its ability to survive the housing crisis.
The lender had specialized in “Alt-A” loans that often go to people who cannot document income or assets. It ran into trouble when the market for nontraditional loans evaporated.
IndyMac on Monday said it would eliminate 3,800 jobs and stop making most home loans after regulators concluded it was no longer “well capitalized.”
IndyMac’s nonperforming assets had already risen to $2.1 billion as of March 31, 2008, only slightly less than the company’s adjusted total equity plus reserves, and they are expected to increase, according to S&P.
“We are concerned that the size and pace of credit deterioration and increasingly high charge-off levels have greatly impaired the thrift’s ability to overcome its still-mounting asset-quality problems,” the rating firm said.
S&P said it currently sees “little upward momentum” to IndyMac’s ratings and said further downgrades could be triggered by the lender’s worsening financial position, any regulatory actions or further deterioration in the housing and mortgage markets.
The outlook, which indicates the likely direction of the rating over the next two years, could return to stable if credit loss levels abate and the company returns to a modest level of profitability and maintains adequate capital and liquidity levels, S&P added.
Reporting by Anastasija Johnson; Editing by Jonathan Oatis