Nationstar Mortgage Holdings Inc. (NSM)

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Nationstar Mortgage 1st-Quarter Profit Up 25%; Raises Year Views

Date : 05/07/2013 @ 7:33AM
Source : Dow Jones News
Stock : Nationstar Mortgage Holdings Inc. (NSM)
Quote : $40.75 0.76 (1.90%) @ 8:00PM

Nationstar Mortgage Holdings Inc.'s (NSM) first-quarter profit rose 25% as the residential mortgage loan servicer reported a surge in fee income and gains on mortgage loans held for sale.

Results sharply beat Street estimates.

The company raised its per-share earnings view for the year to $4.05 to $4.75 from its prior view of $3.70 to $4.35. It also raised its view for 2014, now expecting $6.45 to $7.50 a share, up from its prior view of $5.60 to $6.50.

Nationstar also said it had acquired direct-to-consumer originator Greenlight Financial Services, giving it another lending channel for servicing asset generation.

As a mortgage servicer, Nationstar provides administrative functions on loans that are held by banks, government organizations, private investment funds and other owners of mortgage loans and securities. It earns revenue based primarily on the unpaid principal balance of loans serviced.

Nationstar reported a profit of $62.6 million, or 70 cents a share, up from $50.2 million, or 67 cents a share, a year earlier. Adjusting for items like platform ramp expenses tied to an acquisition, per-share earnings were 85 cents from 44 cents.

Revenue surged to $431.1 million from $164.1 million as fee income more than doubled, as did gains on mortgage loans held for sale.

Analysts polled by Thomson Reuters recently expected per-share earnings of 73 cents on revenue of $383 million.

Chief Executive Jay Bray said the company had generated "strong momentum" across its mortgage services platform. In servicing he said Nationstar grew its portfolio organically and through high-return acquisitions. In originations quarterly activity increased "across the board," and the company sees increased potential from the Home Affordable Refinance Program.

Nationstar noted origination revenue was up about 7% to $185.7 million on an 11% quarterly increase in fundings to $3.4 billion.

Nationstar's servicing portfolio, as measured by unpaid principal balance, increased 50% sequentially to end the first quarter at $312 billion.

Servicing fee income before fair value adjustments increased 37% compared with the prior quarter to $239.7 million.

Total expenses and impairment rose to $268.6 million from $96.6 million.

The company went public in March in a lackluster debut on the New York Stock Exchange. While most residential mortgage loan servicing is concentrated among a few banks, Nationstar is a nonbank servicer, and has said it believes the industry is shifting away from banks toward nonbank servicers as banks seek to exit the business, which can be volatile and capital-intensive.

Earlier this year, Nationstar teamed up with homebuilder KB Home (KBH) to form a mortgage banking services firm called Home Community Mortgage LLC. And last year, Nationstar agreed to acquire roughly $10.4 billion in residential mortgage servicing rights from Bank of America Corp. (BAC) in a co-investment with Newcastle Investment Corp. (NCT).

Shares closed Monday at $37.74 and were inactive in recent premarket trading. The stock has jumped 22% so far this year.

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