Rithm Capital Corp. ((RITM)) has held its Q1 earnings call. Read on for the main highlights of the call.
The recent earnings call for Rithm Capital Corp. presented a mixed yet optimistic outlook, highlighting the company’s robust financial performance across various segments, despite facing certain challenges. The call underscored strong growth in earnings and specific business areas such as Sculptor Real Estate Fund V and Genesis Capital. However, concerns were raised regarding the undervaluation of equity and a decline in GAAP net income due to market volatility. Newrez’s impressive origination and servicing growth was also noted, although it faced some margin compression challenges. Overall, the call provided a balanced view of the company’s achievements and hurdles.
Strong Financial Performance
Rithm Capital Corp. reported earnings available for distribution at $0.52 per diluted share, reflecting an 8% year-over-year growth. This marks the 22nd consecutive quarter where earnings available for distribution exceeded common dividends paid, showcasing the company’s consistent financial strength.
Sculptor Real Estate Fund V Commitments
A significant highlight was the Sculptor Real Estate Fund V, which has secured commitments up to $3.2 billion. This makes it the largest real estate fund in Sculptor’s history, indicating strong investor confidence and potential for future growth in the real estate sector.
Genesis Capital Growth
Genesis Capital demonstrated notable growth with a 7% increase in production year-over-year, adding 33 new sponsors in the quarter. This expansion underscores Genesis Capital’s strategic positioning and ability to attract new business.
Newrez Servicing Business Performance
The Newrez servicing portfolio reached an impressive $845 billion, with third-party servicing growth adding four new clients in the first quarter. This growth highlights Newrez’s expanding footprint and its ability to manage a large volume of servicing assets effectively.
Newrez Origination Growth
Newrez’s origination business reported $11.8 billion in funded volume, with a pre-tax income increase of 54% compared to the first quarter of 2024. This significant growth in origination reflects Newrez’s strong market presence and operational efficiency.
GAAP Net Income Decline
Despite strong performance in other areas, Rithm Capital’s GAAP net income was $36.5 million or $0.07 per diluted share, with a return on equity of 2%. This decline was attributed to mark-to-market volatility around the MSR business, indicating challenges in maintaining stable income under current market conditions.
Undervalued Equity
A critical concern raised during the call was the company’s equity being severely undervalued, trading at about 83% of book value. This undervaluation presents a significant challenge and an opportunity for the company to explore strategic actions to unlock shareholder value.
Origination Margin Compression
The origination business faced increased competition, leading to margin compression and impacting profitability. This challenge highlights the competitive pressures in the market and the need for strategic adjustments to maintain profitability.
Forward-Looking Guidance
Looking ahead, Rithm Capital emphasized its robust performance and strategic growth initiatives amidst market volatility. The company aims to unlock shareholder value potentially through capital actions by the end of 2025. With a common stock dividend yield of 8.7% and a liquidity position of $1.9 billion, Rithm Capital is well-positioned to navigate future challenges and capitalize on growth opportunities.
In conclusion, Rithm Capital Corp.’s earnings call painted a picture of a company with strong financial performance and growth potential, despite facing some market-related challenges. The call highlighted the company’s strategic initiatives and commitment to unlocking shareholder value, making it an intriguing prospect for investors in the financial markets.