New Century’s Net Income Rises 6%, but Shares Fall

New Century Financial Corp., one of the largest U.S. subprime mortgage lenders, said Thursday that profit rose 6% as loan volume jumped by more than one-third.

The company’s shares, however, fell on unusually heavy volume amid concern that lending margins are shrinking faster than expected and might remain pressured.

New Century, based in Irvine, affirmed its 2005 profit forecast, but left room for the possibility that earnings might fall short of analysts’ forecasts.

“The company indicated that its margins were coming under much more severe pressure than anticipated at the end of the last quarter,” said Richard Eckert, an analyst for Roth Capital Partners in Newport Beach.

Net income for New Century increased to $78.7 million, or $1.44 a share, from $74.1 million, or $1.80, a year earlier.

New Century, which increased its quarterly dividend 3%, had more shares outstanding than a year earlier. It converted last year into a mortgage real estate investment trust.

Excluding a one-time charge, profit totaled $1.70 a share. Analysts polled by Reuters Estimates on average expected $1.69.

Revenue rose 48% to $478 million, as loan originations increased 39% to $11.5 billion.

Operating margin, however, fell to 1.13% from 1.73% in the third quarter and 2.67% in the second quarter. It was 1.94% at the end of 2003.

“I certainly would have to acknowledge that competitive conditions remain intense, and we as an industry have not raised rates in step with the market,” Brad Morrice, New Century’s chief operating officer, said during a conference call.

“We do hope that we can move the rates and the margins up a bit in the course of the year,” Morrice said.

New Century still predicts 2005 profit of at least $9 a share. Analysts are forecasting $9.77.

The company expects to increase loan production at least 7% to $45 billion or more in 2005 as it adds staff.

New Century shares fell $7.38 to $54.25 on the New York Stock Exchange. Trading volume, usually less than 1 million shares, topped 6.2 million.