Nomura Securities on U.S. Agency Mortgage REITs: Q4 Earnings Wrap...More Dividend Cuts Appear Likely
AGNC Hot Sheet
Rating Summary:12 Buy, 4 Hold, 0 Sell
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Nomura Securities on U.S. Agency Mortgage REITs: Are We There Yet? - Q4 Earnings Wrap...More Dividend Cuts Appear Likely
Analyst, Bill Carcache, said, "Group Delivers Solid Risk-Adjusted Returns Despite Tougher Macro: Overall, the mortgage REITs delivered solid risk-adjusted returns during 4Q11 despite continued flattening of the yield curve. As expected, spreads contracted and dividends were cut. Prepayment speeds generally increased, and they remain a concern in the current environment. Book value growth was flat to negative for most companies (ex-AGNC), and economic returns were generally lower relative to the first three quarters of 2011."
"American Capital Agency (Nasdaq: AGNC) Remains Our Top Pick in the Space: In the face of a difficult environment, AGNC continues to beat expectations. Although spreads tightened, the company beat both consensus and our EPS estimates for the quarter through strong realized gains. The company’s low balance and HARP-centric portfolio continued to experience relatively low prepayment speeds (9% vs. an average of ~21% for the other mortgage REITs that have reported thus far). In addition, AGNC drove ~3% QoQ book value growth while others managed to keep their book values relatively flat. All told, AGNC generated economic returns well in excess of its peers this quarter. We exited 4Q11 with greater conviction in our bullish investment thesis, which revolves around management’s consistent ability to optimize risk and return through best-in-class asset selection."
Other stocks of note: CYS Investments (NYSE: CYS), Annaly Capital (NYSE: NLY), Anworth Mortgage (NYSE: ANH), Hatteras Financial (NYSE: HTS), and Capstead Mortgage (NYS: CMO)
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Analyst, Bill Carcache, said, "Group Delivers Solid Risk-Adjusted Returns Despite Tougher Macro: Overall, the mortgage REITs delivered solid risk-adjusted returns during 4Q11 despite continued flattening of the yield curve. As expected, spreads contracted and dividends were cut. Prepayment speeds generally increased, and they remain a concern in the current environment. Book value growth was flat to negative for most companies (ex-AGNC), and economic returns were generally lower relative to the first three quarters of 2011."
"American Capital Agency (Nasdaq: AGNC) Remains Our Top Pick in the Space: In the face of a difficult environment, AGNC continues to beat expectations. Although spreads tightened, the company beat both consensus and our EPS estimates for the quarter through strong realized gains. The company’s low balance and HARP-centric portfolio continued to experience relatively low prepayment speeds (9% vs. an average of ~21% for the other mortgage REITs that have reported thus far). In addition, AGNC drove ~3% QoQ book value growth while others managed to keep their book values relatively flat. All told, AGNC generated economic returns well in excess of its peers this quarter. We exited 4Q11 with greater conviction in our bullish investment thesis, which revolves around management’s consistent ability to optimize risk and return through best-in-class asset selection."
Other stocks of note: CYS Investments (NYSE: CYS), Annaly Capital (NYSE: NLY), Anworth Mortgage (NYSE: ANH), Hatteras Financial (NYSE: HTS), and Capstead Mortgage (NYS: CMO)
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