Assessing Rithm Capital's Performance For Q2 2025

Core Viewpoint - Rithm Capital Corp. (NYSE:RITM) reported solid Q2 results with earnings exceeding the dividend and a minor book value gain, indicating effective management execution and fair pricing of shares at current levels [1]. Group 1: Financial Performance - RITM's book value (BV) showed a minor increase, aligning with expectations, and achieving a variance within 1.5% for three consecutive quarters, reflecting stability amidst sector volatility [2][9]. - Funded loan originations increased from $11.8 billion in Q1 2025 to $16.3 billion in Q2 2025, slightly outperforming the projected $15.0 billion [3]. - The gross origination spread (GOS) margin decreased from 1.37% in Q1 2025 to 1.22% in Q2 2025, closely matching the projected 1.25% [4][5]. - RITM's adjusted core earnings per share for Q2 2025 were reported at $0.472, slightly outperforming expectations [26][27]. Group 2: Sub-Portfolio Performance - The MSR sub-portfolio experienced valuation changes of $22 million and amortization of $177 million, with results closely matching projections [9][10]. - Genesis Capital's origination volume increased from $0.9 billion in Q1 2025 to $1.2 billion in Q2 2025, exceeding the projected $1.1 billion [22]. - Asset management revenues rose from $88 million in Q1 2025 to $95 million in Q2 2025, although slightly below the projected $100 million [23][24]. Group 3: Operational Insights - RITM's operational expenses increased from $509 million in Q1 2025 to $534 million in Q2 2025, slightly above the projected $525 million [29]. - The company maintained a strong dividend coverage, with adjusted core earnings comfortably exceeding the quarterly dividend rate of $0.25 per share [42]. - Management is considering a potential spin-off of its mortgage origination and servicing businesses, with no definitive timeline provided [39][41]. Group 4: Market Position and Valuation - RITM's current valuation is deemed appropriate, with a hold recommendation, as the company is not currently viewed as a strong buy [47]. - The company’s risk/performance rating remains at 3.5, indicating a balanced approach to managing interest rate fluctuations [32][35].