AGNC Investment Corp's Positive Outlook for 2024 and Financial Performance
2024-01-24
AGNC Investment Corp recently held its fourth-quarter 2023 shareholder call to discuss the company's earnings for the quarter. The call was attended by key executives including Peter Federico, the President and Chief Executive Officer, and Bernie Bell, the Executive Vice President and Chief Financial Officer.
During the call, the company provided a safe harbor statement, offering legal protection for any forward-looking statements made. AGNC Investment Corp also discussed factors that could affect actual results, including those beyond their control and mentioned in their periodic reports filed with the Securities and Exchange Commission.
The discussion covered various topics related to the company's performance and market conditions. One key point was the impact of the Federal Reserve's actions on AGNC Investment Corp's performance. The Fed's monetary policy pivot triggered a dramatic rally across the fixed-income and equity markets. Treasury rates rallied by over 100 basis points, and the Bloomberg Aggregate Bond Index saw a total return of nearly 10% during the same period. The performance of Agency MBS closely followed Treasury yields, with spreads reaching their widest level when Treasury yields peaked in mid-October.
The call also highlighted a positive outlook for Agency MBS in 2024. Factors supporting this outlook include historically attractive valuation levels, low mortgage origination volumes, declining interest rate volatility, a less inverted yield curve, and a more investor-friendly monetary policy stance by the Federal Reserve.
AGNC Investment Corp's financial performance was a key topic of discussion. The company reported a very favorable 12% economic return for the fourth quarter of 2023. Comprehensive income per share was $1, and the economic return on tangible common equity was 12.1% for the quarter. Additionally, the company's tangible net book value per share increased by 1% to 2% in January.
The call also addressed the company's portfolio management, leverage position, and the long-term outlook for shareholders. AGNC Investment Corp's strategy for managing leverage takes into account various factors such as the environment, expectations for future leverage, interest rate volatility, and the cost of rebalancing. The breakeven return on equity for the business is around 15.5%, and mortgages are generating mid-teens returns on equity.
The outlook for shareholders over the long run is promising, particularly if interest rate volatility decreases. Currently, money managers are the primary buyers of Agency MBS, while the outlook for banks as investors in the mortgage space remains uncertain due to questions regarding bank regulation. However, with deposits stabilizing and the possibility of rate cuts and slower C&I loan growth, banks could become a more significant investor base for the space.
Overall, the AGNC Investment Corp fourth-quarter 2023 shareholder call covered a range of important business topics, providing valuable insights into the company's financial performance, market conditions, portfolio management, leverage position, and the outlook for shareholders. The call offered a glimpse into the company's strategies and expectations for the future.