rocket company‘s parent Rocket MortgageProfitability was achieved in the first quarter of 2024 through initiatives to reduce costs and increase investments in artificial intelligence (AI). In a shrinking market, competitors exiting the field allows the company to increase market share and gain sales profits.
Ultimately, the Detroit-based bank reported GAAP net income of $291 million from January to March, following a first-quarter 2023 GAAP net loss of $411 million, according to filings with the U.S. Securities and Exchange Commission. It lost $233 million in the fourth quarter of the year. Securities and Exchange Commission (U.S. Securities and Exchange Commission).
Rocket also reported Thursday afternoon adjusted net income of $84 million in the first quarter of 2024, an improvement from a loss of $111 million in the first quarter of 2023 and a loss of $6 million in the fourth quarter of 2023.
Rocket reported first-quarter adjusted net income of $1.2 billion, well above the high end of its guidance range. This is also a significant increase from the $666 million in the first quarter of 2023 and the $694 million in the fourth quarter of 2023. . There is no change from the same quarter in 2023.
“We accelerated revenue growth for the third consecutive quarter and achieved our highest profitability in two years,” Varun Krishna, chief executive and director of Rocket Companies, said in a prepared statement. ”
“Both purchase and refinance market share expanded, showing double-digit percentage growth year-over-year,” Krishna said in a conference call with analysts. He added that Rocket’s analysis showed that “we have participation from large-scale industries “
The company did not break out purchases and refinances in its earnings report.
Rocket originated $20.2 billion in mortgage loans in the first quarter of 2024, up from $17.2 billion in the previous quarter and $16.9 billion in the same period last year. Sales margin in the first quarter of 2024 was 311 basis points, up from 268 basis points in the previous quarter.
“Sales margin growth over the past year has been driven in part by the continued release of capacity in the system,” Rocket Companies chief financial officer Brian Brown said.
By channel, Rocket reported that from January to March, it closed $9 billion in loans through its direct-to-consumer channel and $7.7 billion through its third-party originator (TPO) channel. The lender is the conduit it provides to mortgage brokers and has historically been a stronger purchasing source for the business.
Service asset growth
The company’s servicing portfolio, which includes subordinated servicing loans, had an unpaid principal balance (UPB) of $511 billion at the end of the first quarter. Rocket has serviced 2.5 million loans and generated approximately $1.4 billion in annual fee revenue.
The company has been aggressively acquiring services assets. The company spent $110 million to acquire four mortgage servicing rights (MSR) portfolios in March and April, adding $8.2 billion to UPB.
Executives said the loans in these portfolios have a blended weighted average coupon rate higher than the current portfolio. When interest rates drop, this provides opportunities to refinance, as well as sell home equity loans, cash-out refinances and other products.
Rocket’s home equity products are also growing, the company claims. Krishna told analysts that transaction volume more than tripled compared with the same period last year, “providing us with a springboard to consolidate our customers’ first and second lien mortgages in the future when interest rates decline.” loan.
Brown told analysts that Rocket’s customer retention rate in the first quarter was 96%, “which is still several times the industry average retention rate.”
Led by fintech veteran Krishna, Rocket is more focused on technology than ever. Last month, the company launched Rocket Logic, a patented artificial intelligence-driven platform active in business servicing and originator-handled calls, including loans sent by mortgage brokers working with partners. Rocket Professional TPO.
Looking ahead, the company expects second-quarter 2024 adjusted revenue to be in a range of $1.075 billion to $1.225 billion.
“The industry-wide traditional spring buying season is off to a slow start. March and April of 2024 have been the worst for purchase applications in the past 30 years,” Brown said. “Despite the challenging rate and inventory environment, our second-quarter guidance reflects our expectation that higher value positions will once again take share in the second quarter.”
Krishna said he thinks Rocket will experience a “perfect storm” to expand market share. This is because the mortgage industry is undergoing consolidation and capacity rationalization. Additionally, banks are reducing mortgage exposure, which is likely to become more evident in the Basel III endgame rules.
in addition, national association of realtorsKrishna added that commission lawsuit settlements across the country present “an opportunity to change the home value equation and pave the way for a better experience for home buyers and sellers.”
