Mortgage REITs: Credit Suisse cuts PTs on 'significant' book value declines
01/04/2020 14:42
** Credit Suisse lowers price targets across its mREITs
coverage universe by 41% on avg to reflect decline in book
values (BV) and continued funding risk
** Brokerage says given extreme volatility in spreads and
rates, coupled with unknown timing of deleveraging actions,
expects more variance among Q1 BV results than previous qtrs
** Ascribes higher multiple on agency MBS portfolios given
higher degree of funding confidence and continued involvement of
the Fed buying assets
** CS says New Residential Investment Corp NRZ.N is its
top pick given attractive risk/reward, cites NRZ's ability to
handle near-term liquidity challenges following co's business
update
** NRZ tumbled ~16% Tues after co slashed its stock dividend
by 90% and forecasted Q1 BV decline of ~25%-30% since end-Dec as
it takes measures to de-risk its portfolio urn:newsml:reuters.com:*:nBwb1KcFa
urn:newsml:reuters.com:*:nL1N2BO22P
** Two Harbors Investment Corp TWO.N is 2nd most
attractive idea, CS says, given reduced risk profile with sale
of its non-agency MBS portfolio, and with stock trading at 42%
discount to updated BV
** About 8 mREITs have suspended dividend payouts in past
few weeks in effort to conserve cash, and others have sold
assets to meet margin calls and reduce leverage given bond
market turbulence caused by the COVID-19 pandemic urn:newsml:reuters.com:*:nL1N2BN14F
urn:newsml:reuters.com:*:nL1N2BM04Q
** In Mar, the Dow Jones U.S. Mortgage REITs index and
iShares Mortgage Real Estate ETF REM.N fell ~54% and ~58%,
respectively. The S&P 500 .SPX declined 12.5% last month
Credit Suisse price target revisions:
(Reporting by Lance Tupper)
((lance.tupper.tr.com@reuters.net
lance.tupper@tr.com 646-223-5017))