AGNC Expects Strong Income For Q1, Softer Book Value: Analyst Sees Recovery Potential

Jones Research analyst Jason Weaver shared thoughts on AGNC Investment Corp. AGNC first-quarter preliminary numbers released today.

AGNC said it expects net spread and dollar roll income of 44 cents. That’s higher than analysts’ estimate of 41 cents and consensus of 39 cents.

The company’s total comprehensive income per share is 12 cents, much better than analysts’ estimates of 7 cents.

As of March 31, AGNC held a total investment portfolio valued at approximately $78.9 billion. That includes around $7.5 billion in to-be-announced agency mortgage-backed securities (MBS). It also has about $900 million in credit risk transfer, non-Agency securities, and other mortgage-related credit investments.

The analyst notes that at the end of the quarter, AGNC's tangible book value (TBV) stood at $8.25, which reflects a decline of 190 basis points from $8.41, primarily driven by spread widening.

Weaver adds that he sees additional pressure continuing into the second quarter, with TBV estimated at $7.75-$7.85 as of April 9, representing a 5.5% decline quarter-to-date.

This drop has also contributed to an increase in leverage, which now stands at roughly 7.9x, cites the analyst.

Overall, the analyst says that although performance so far in the second quarter has been underwhelming, he anticipates some near-term recovery in book value per share (BVPS) as market volatility begins to ease.

Mortgage-backed securities (MBS) yields, which have been lagging behind Treasury and swap rates, are expected to converge in the near term, adds the analyst.

Moreover, Weaver says that AGNC’s ability to deploy new capital into Agency RMBS at current expected returns of over 20% could enhance its dividend sustainability over the medium term.

Price Action: AGNC shares are up 0.06% at $8.125 at the last check Friday.

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