Invesco REIT takes loss as Iran volatility hits agency MBS

Invesco Mortgage Capital recorded a loss under generally accepted accounting principles during the first quarter, when it reported that Iran War volatility weakened agency residential mortgage-backed securities performance.

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The real-estate investment trust reported a net loss attributable to common shareholders of $23.1 million, underperforming consensus estimates for a positive $1.26 million earlier in the month, according to S&P Capital IQ Pro.

However, Invesco Mortgage also reported $44.71 million in positive earnings available for distribution, a closely watched figure for REITs. The normalized earnings figure outperformed a consensus mean estimate of $40.46 million earlier in the month.

“Geopolitical tensions, higher energy prices and renewed inflation concerns drove increased interest-rate volatility,” new CEO Kevin Collins said in a press release, noting that this caused higher-coupon agency RMBS to underperform relative to U.S. Treasury bonds.

The government-sponsored enterprises’ MBS purchases have lessened the negative impacts associated with market volatility. The Basel III endgame capital reform could increase bank participation in the future.

Agency commercial-backed securities that Invesco Mortgage invests in performed more favorably during the quarter. These multifamily bonds accounted for 11.9% of its portfolio during the period. Various forms of agency RMBS, including to-be-announced securities and collateralized mortgage obligations, accounted for the balance.

Invesco Mortgage Capital’s stock was up 1.6% at $8.25 per share early Friday afternoon.

Other housing finance-related companies that have reported concerns about the impact of the Iran War on the market in their earnings include Beazer Homes.

Spring buying initially was in line with expectations, but subsequent high rates and construction costs hurt demand, the company reported Thursday.

“Geopolitical events triggered a rapid rise in mortgage rates and gas prices in March, impacting consumer sentiment. As a result, we are more cautious about near-term demand,” said Allan P. Merrill, the company’s chairman and CEO, in a press release.

Beazer reported a $900 million loss as sales volume weakened, but it outperformed analysts’ expectations by taking steps like emphasizing higher-margin presale homes and adding efficiency measures to operations. 

The mean consensus estimate had been that Beazer would report a loss of $20.17 million, according to S&P Capital IQ Pro.

The builder’s stock was down 5.26% on the day and trading at $20.46 early Friday afternoon.