Rithm Capital (US:RITM)2022-11-02 15:58Financial Data and Key Metrics Changes - GAAP net income for Q3 2022 was $125 million, or $0.26 per diluted share, with earnings available for distribution at $153 million, or $0.32 per diluted share [20] - Book value remained essentially unchanged quarter-over-quarter despite market volatility [16] - Cash and liquidity stood at $1.8 billion, with total equity in the business at $7 billion [20] Business Line Data and Key Metrics Changes - The Genesis business originated $600 million in loans during the quarter, primarily consisting of floating rate, high coupon loans [13] - The servicing segment generated $267 million in pre-tax income, while the origination business reported a pre-tax loss of $57 million, including one-time charges [35] - The single-family rental business currently has about 3,700 homes, with occupancy above 90% [31] Market Data and Key Metrics Changes - The company has lowered loan-to-value (LTV) ratios and tightened underwriting guidelines in response to expected declines in home prices [14] - The mortgage servicing rights (MSR) portfolio has a weighted average coupon of 3.7% and a weighted average maturity of about five years [17] Company Strategy and Development Direction - The company plans to expand investment strategies, including the acquisition of 50% of Senlac Ridge Partners, focusing on commercial real estate [9][10] - A new third-party fund business is being formed to raise callable capital in private markets, aiming to create value for shareholders [11] - The company is prioritizing efficiency in its mortgage operations and is prepared to capitalize on future opportunities as market conditions change [12] Management's Comments on Operating Environment and Future Outlook - Management acknowledges a challenging investing environment and maintains a cautious outlook, expecting continued difficulties [8] - The company is optimistic about future opportunities in the housing market, particularly as home prices decline and cap rates increase [15] - Management emphasizes the importance of maintaining liquidity and reducing expenses while driving consistent earnings and dividends [8] Other Important Information - The company has $12 billion in custodial deposits, which will benefit from rising interest rates [17] - The company is focused on maintaining a strong presence with its customer base of over three million [45] Q&A Session Summary Question: What inning is the overall industry in regarding headcount reduction? - Management believes they are in the seventh or eighth inning of headcount reduction, having been aggressive in rightsizing [44] Question: What is the outlook for consolidation in the industry? - Management expects to see some mortgage companies throw in the towel, leading to potential MSR sales, but has not seen a significant number yet [46] Question: What is the plan for third-party capital? - The timeline for raising third-party capital is immediate, leveraging expertise in financial services and targeting asset classes not currently on the balance sheet [64][66] Question: Can you discuss the repositioning of the portfolio? - The company has moved up in coupon rates on agency mortgages to maintain compliance and avoid negative carry [72] Question: What adjustments are being considered in the origination channel? - The company plans to merge the joint venture business with the retail business to streamline operations and improve efficiency [79] Question: What is the current state of the single-family rental business? - The company is being cautious in acquiring new homes, focusing on maintaining occupancy and waiting for better entry points as cap rates increase [86] Question: How is the credit quality of the Genesis business being assessed? - Management feels confident about the credit quality due to corporate guarantees on loans and favorable LTV ratios [89]