Rithm Capital (US:RITM)2023-05-04 13:45Financial Data and Key Metrics Changes - GAAP net income for the quarter is $68.9 million or $0.14 per diluted share, with core earnings at $171.1 million or $0.35 per diluted share [19] - Book value decreased from $12 to $11.67, reflecting a $0.23 dilution from warrant exercise, indicating stability despite market volatility [19][28] - Cash and liquidity at the end of the quarter is $1.6 billion, total equity is $6.9 billion [19] Business Line Data and Key Metrics Changes - The origination segment decreased by $11.7 million due to seasonality, with March breakeven [1] - The mortgage company represents 75% of Rithm's full MSR portfolio, with newly originated MSRs at 6.37% [40] - The Genesis business is expected to yield unlevered returns of 10% to 12%, with potential returns of 20% to 30% [32] Market Data and Key Metrics Changes - The company is seeing increased competition in the retail channel due to reduced inventory in the market [8] - The overall market for MSRs is viewed as attractive, with expected returns of 15% to 20% [2][6] - Delinquencies remain extremely low, indicating a healthy portfolio [31][23] Company Strategy and Development Direction - The company aims to transition into an alternative asset manager, evaluating alternatives for its mortgage company and likely filing an S-1 [17][20] - The focus is on acquiring distressed assets and direct lending opportunities, particularly in the commercial real estate sector [22][60] - The company plans to raise significant pools of capital over the next three to nine months to enhance earnings growth [29] Management's Comments on Operating Environment and Future Outlook - Management believes the current stress in the banking system will create greater opportunities for lending business lines [16][18] - The company will not fight the Fed's interest rate policies and aims to maintain stable book value while growing earnings [18][28] - There is optimism regarding the pipeline of investment opportunities, particularly in consumer and real estate assets [60][77] Other Important Information - The company has a strong track record of consistent earnings and has paid out $1 billion in dividends over the past two years [16][29] - The investment portfolio is performing well, with a focus on customer retention and reducing expenses [31][23] Q&A Session Summary Question: Update on book value quarter to date - Book value is essentially unchanged from Q1 [5] Question: MSR opportunity focus - The focus is more on POS and conventional sides, targeting 15% to 20% returns [6] Question: Competitive positioning in origination market - The company is exploring opportunities in the Genesis business and is optimistic about the potential for higher returns [46][55] Question: Potential for creating a public entity from the mortgage company - The company is likely to file an S-1 to explore this option [47] Question: Opportunities from regional bank stress - The company sees significant investment opportunities arising from the stress in regional banks [59][77] Question: Capital raising ambitions - The company is optimistic about raising large pools of capital for investment strategies [81]