Doral stock plunges 19%, faces delisting
Doral Financial Corp.’s stock plunged 19 percent Monday, closing at .57 cents per share. The significant drop comes in the wake of $32.5 million in third-quarter losses and a warning from the New York Stock Exchange of a possible delisting, as its stock has been trading for less than $1 over the past 30 days.
Doral’s net losses for the quarter ended Sept. 30, compared to a net loss of $1.6 million for the quarter ended June 30, 2012 and a net loss of $30.2 million for the quarter ended Sept. 30, 2011.
For the nine months ended September 30, 2012, Doral reported a net loss of $31.6 million compared to a net loss of $22.4 million for the same period of 2011.
Bank executives attributed the downward spiral to bad mortgage loans.
“Our results reflect the high credit costs as we continue to work with thousands of homeowners during this difficult economic time. Despite this, we have increased revenue, strengthened our mortgage and retail franchise in Puerto Rico, continued to successfully grow our U.S. operations, and preserved our high levels of capital,” said Doral Financial Corporation CEO Glen Wakeman upon revealing results last week.
“Some of our Puerto Rican homeowners struggled to make their monthly payment as unemployment grew and incomes reduced,” he said. “We believe that keeping these customers in their home and making payments is the best solution for everyone. This temporary relief has helped a majority of these customers re-balance their household income and obligations. Unfortunately, some cannot and they are re-defaulting.”
Despite the grim scenario, Wakeman told investors during a conference call that Doral’s mortgage loan production in Puerto Rico grew 21 percent, from $209.4 million in the second quarter of 2012 to $254.3 million in the third quarter of 2012.
“That is one part of the mortgage story, new volume is another. Doral profits from originating and selling conforming loans,” he said. “Doral has been and continues to be a leader in this space. Our mortgage franchise is strong and growing.”
He said the bank’s mortgage production reached its highest level in more than five years. Doral sells and services 94 percent of the loans it originates, he said.
“From a lending point of view, we are redeploying our capacity from Puerto Rico into the U.S.,” he said.
“As you have seen from our results, this asset substitution strategy has added substantial earnings,” he told investors.
Despite the losses, the company increased net interest income by $1.5 million to $55.6 million in the third quarter of 2012 from $54.1 million in the second quarter of 2012. Increased total net loans receivable by $103.8 million from the second quarter of 2012 to the third quarter of 2012 based on strong growth in the U.S. commercial portfolio.
Retail deposits also grew by $93.2 million from the second quarter of 2012 to the third quarter of 2012.
Doral’s market troubles were predicted two days before results were released by investment banking firm B. Riley, which lowered its rating on Doral stock from “buy” to “neutral” after the company reported fairly disappointing results for three of the last four quarters.
“We had expected the company to be reporting sustained core operating profitability by now, but it now appears that profitability may be more sporadic than sustained,” said Senior Analyst Joe Gladue in the report released Nov. 7.
Saying Doral’s stock has “taken a beating,” Gladue nevertheless said Doral has some value and that its mortgage origination platform in Puerto Rico could be of interest to another bank.
“However, the list of potential buyers appears to be shrinking with the pending acquisition of BBVA’s Puerto Rico operations by Oriental Financial Group,” he said.