Rithm Capital (US:RITM)2023-02-08 14:29Financial Data and Key Metrics Changes - For Q4 2022, the company reported a GAAP net income of $81.8 million, or $0.17 per diluted share, with earnings available for distribution at $156.9 million, or $0.33 per diluted share [9] - Full year GAAP net income reached $864.8 million, or $1.80 per diluted share, with earnings available for distribution totaling $633 million, or $1.31 per diluted share [49] - The company ended the year with a balance sheet of approximately $32 billion and total equity of $6.9 billion [8][9] Business Line Data and Key Metrics Changes - The mortgage company was right-sized, reducing general and administrative expenses by over 50% year-on-year [6][27] - The Genesis business originated nearly $2.5 billion in loans, with average coupons around 10% [7][30] - The MSR portfolio totaled $600 billion, with a weighted average coupon of 3.7% [57] Market Data and Key Metrics Changes - The weighted average mortgage rate for Fannie Mae and Freddie Mac loans was 3.62%, while for Ginnie Mae borrowers it was 3.57% [18] - Home prices have declined approximately 10% from their peak, leading to expectations of future acquisitions when the market stabilizes [19] Company Strategy and Development Direction - The company rebranded to Rithm Capital and internalized management contracts to drive earnings and transition to an alternative asset manager [5] - Plans to launch a private funds business and expand into Europe in Q2 2023 to capitalize on market dislocations [17] - The focus remains on opportunistic investments across various asset classes, including commercial real estate and private credit [72] Management's Comments on Operating Environment and Future Outlook - The management anticipates a challenging economic landscape in 2023, with potential volatility in the rate market [23] - The company is positioned well for higher rates and aims to generate strong returns for shareholders [16][19] - Management expressed confidence in the performance of the MSR sector despite rising mortgage rates [18][57] Other Important Information - The company has a strong customer base of 3.1 million consumers and is focused on customer retention and expanding product offerings [46] - The servicing business currently manages $500 billion in assets, with a gain on sale margin of 1.81% in Q4 [56] Q&A Session Summary Question: What are the expectations for the private credit business? - Management believes the private credit business will be a significant win for shareholders, allowing for more opportunistic capital deployment [33] Question: Can you provide an update on servicing technology? - The company is exploring ways to create value through servicing technology and is currently steady in its approach [35] Question: What are the opportunities in Europe? - The company plans to leverage its experience in distressed debt and may raise capital for its European business, likely through private funds [40][65] Question: How does the company view the MSR market? - The company is optimistic about acquiring MSRs if risk-adjusted returns are attractive, especially with potential supply from large institutions [106] Question: What is the outlook for the origination segment? - Management expects the origination segment to return to profitability by Q1 or early Q2, following significant expense reductions [114]