High-Risk Lenders’ Stocks Hit Hard

Worries over the potential for deeper troubles in the “sub-prime” consumer loan market--loans to higher-risk borrowers--are ravaging the stocks of many of the players in that business, including quite a few in the Southland. The latest fallout:

* Shares of Pasadena-based IndyMac Mortgage Holdings, a $7-billion-asset real estate investment trust that originates and buys sub-prime and prime home loans, plummeted $6 to close at $10 on the New York Stock Exchange on Tuesday in the wake of the bankruptcy filing Monday of another mortgage REIT, Criimi Mae Inc. of Maryland.

Fitch IBCA, a credit-rating firm, said it might cut its ratings on IndyMac and other such REITs that use mortgage assets as collateral for other financing activities. The concern is that the falling market value of higher-risk loans--as skittish Wall Street shuns high-risk assets in general--could spur more “margin calls” by lenders to REITs.

Michael Perry, IndyMac’s president, said that while the firm has gotten margin calls, “we’ve easily made them all.” He said that although “earnings going forward could be down from where they are now, our stock indicates that earnings are going to be cut in half or more, and that’s just not the case.”

* Stock of Torrance-based Imperial Credit Industries crumbled $2.05 to a record-low $3.88 on Tuesday on Nasdaq. The company last week warned that it would report a larger-than-expected third-quarter loss as it writes off an investment in collapsed Southern Pacific Funding Corp., a Lake Oswego, Ore.-based lender in the sub-prime home equity loan market.

Imperial, a sub-prime lender itself, figures to lose around $90 million for the quarter, after the write-off.

Another Imperial unit, L.A.-based Southern Pacific Bank, felt compelled last week to reassure its depositors that it isn’t directly connected to Southern Pacific Funding.

* Aames Financial of Los Angeles, a former highflier in the sub-prime market, saw its stock hit a new low of $2.38 on Tuesday on the NYSE, down 25 cents. The company said Sept. 28 that it might put itself up for sale.

Besides fears of rising defaults by sub-prime borrowers if the economy turns down--and the growing risk of a credit crunch that could shut off financing for many such lenders--the sub-prime industry is dogged by concerns over the potential for an accounting rule change that could slash the firms’ reported earnings.

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Ahead of the Market

Stocks to Watch Today

* After the end of trading Tuesday, chip maker Advanced Micro Devices (ticker symbol: AMD; Tuesday close: $19.88), which had been expected to report a fifth straight quarterly loss, reported a profit instead. Sales of AMD’s chips, which compete with Intel’s, rose in the third quarter, and AMD was able to withstand intense price-cutting pressures.

* Loewen Group (LWN, $11.63), the world’s No. 2 operator of funeral homes and cemeteries, said it expects third-quarter earnings “significantly below” estimates but did not give a reason. Shares fell 88 cents before trading was halted for the announcement.

Reporting Quarterly Earnings Today

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Company Ticker symbol Tuesday close Per-share est.* Citizens Bancshares CICS $30.63 $0.40 Comm. West Banc. CWBC 10.38 0.18 Four Media FOUR 4.00 0.09 Granite St. Bankshares GSBI 19.50 0.40 Lindsay Manufacturing LNN 13.00 0.20 Popular BPOP 28.25 0.41 Printronix PTNX 12.25 0.35 Tellabs TLAB 33.50 0.46 Tenet Healthcare TH 28.81 0.44 Yahoo YHOO 124.81 0.09

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* Consensus from IBES International Inc.

Analyst Revisions and New Ratings

* Coinmach Laundry (WDRY, $7.75) was rated “buy” in new coverage by Van Kasper & Co.

* Baker Hughes (BHI, $19.81) was downgraded to “hold” from “buy” by Argus Research.

* Pep Boys-Manny Moe & Jack (PBY, $14.06) was raised to “buy” from “market perform” by Donaldson Lufkin & Jenrette, with a 12-month target of $18.