- Nomura Instinet's Matthew Howlett notes that the strength of mortgage banking results and credit in bank Q3 results last week bode well for fee style/origination/credit-focused mortgage REITs when they start reporting in the coming weeks.
- "Agency MBS REIT earnings results should remain weak and volatile, but their discounted valuations should be the offset," he wrote in a note to clients.
- And he doesn't see any reason why strong earnings momentum shouldn't continue into Q3 for the hybrid/credit side; "premiums to book value multiples should be maintained, if not increased, post earning," he wrote.
- Howlett points out that Wells Fargo last week guided to sustained production volume in Q4 and production margins; PennyMac Mortgage Trust (PMT +1.3%), Redwood Trust (RWT +0.6%), New Residential Investment (NRZ +1.1%), and Ellington Financial (EFC -0.2%) "all have origination capacity in some form and should benefit from this trend," he wrote.
- Sees high residential volume production driving strong loan growth at Chimera Investment (CIM +0.5%) and New York Mortgage Trust (NYMT +0.2%).
- With banks benefiting from mortgage servicing rights-tied hedging, Howlett sees a similar trend with New Residential and Two Harbors Investment (TWO +1%).
- Estimated Q3 reporting dates: Oct. 25 -- New Residential; Oct. 30 -- Chimera; Nov. 1 -- PennyMac, Ellington; Nov. 5 -- New York Mortgage Trust, Two Harbors; Nov. 6 -- Redwood Trust.