(Recasts; adds details from conference call, share movement)
July 18 (Reuters) - IStar Financial Inc SFI.N, which lends primarily to real estate-related businesses, said it expects a quarterly operating loss, hurt by higher loan loss provisions and mark-to-market impairments, knocking its shares down as much as 29 percent.
“I am not optimistic about the economy,” Chief Executive Jay Sugarman said in a conference call with analysts. “The last few weeks have undone much, if not all, the optimism” that followed the U.S. Federal Reserve’s actions at the end of the first quarter.
Continued turmoil in the credit markets have left investors jittery and the recent problems at mortgage giants Fannie Mae FNM.N and Freddie Mac FRE.N have stoked concerns.
“We, like you, are watching very closely, to see if recent Fed and SEC actions will solidify Fannnie and Freddie and set the tone for less volatile third quarter,” he said.
The U.S. Treasury Department and Federal Reserve on Sunday said they would lend money and buy shares, if necessary, in Freddie and Fannie, while the Securities and Exchange Commission came up with an emergency plan to rein in investors who bet against financial companies.
In April, Goldman Sachs had said it was concerned about funding risks for commercial lenders that are reliant on capital market liquidity, like CIT Group Inc (CIT.N), iStar Financial, NewStar Financial Inc (NEWS.O) and CapitalSource Inc CSE.N.
The New York-based iStar said it expects to report net income of 5 cents to 15 cents a share in the second quarter. Excluding a gain from asset sales, it sees a loss of $1.45 to $1.55 a share.
Analysts on average expected a profit of 75 cents a share, excluding items, according to Reuters Estimates.
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.
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.
IStar shares, which fell $3.40 to a low of $8.41, pared some of their early losses and were down $2.81 at $9 in late morning trade on the New York Stock Exchange. The stock is down about 79 percent from the 52 week-high it hit on July 19, 2007. (Reporting by Ratul Ray Chaudhuri in Bangalore; Editing by Bernard Orr, Himani Sarkar)