IndyMac's New Strategy Puts Emphasis on Servicing.

PASADENA, CA -- The chairman and chief executive of IndyMac Bancorp Inc. here, Michael W. Perry, sent a letter to stockholders which says the company will de-emphasize growth in its whole loan and mortgage-backed securities investment portfolios.

Instead, the letter says, "Our capital deployment and profit growth will be more focused in the future on the two broad segments of our mortgage banking business, mortgage production and mortgage servicing."

The company is seeing its return on equity decline in the whole loan and MBS portfolios. Part of the problem is tighter spreads.

IndyMac has a thrift subsidiary, which helps to fund its mortgage activities. But the competition for consumer deposits has increased, and consumer behavior, aided by the Internet, has changed, with deposit funds being moved to the highest-yielding options.

Mr. Perry called the changes "fine-tuning more than a strategic shift." He believes that the narrowing of net interest margins actually favors IndyMac because "we already have a relatively high, market-based cost of funds and have learned, through trading assets and loans in the secondary market, how to earn strong overall ROEs despite that fact. Other financial institutions rely on their low cost of funds to achieve the same or lower ROEs as IndyMac, and, as their cost of funds advantage erodes, ...