Don Fandetti

Don Fandetti asked for more details and quantification regarding the better-than-expected recapture rates observed on the Mr. Cooper book.

Answer

Brian Brown (CFO, Rocket Companies) attributed the strong recapture on the Mr. Cooper book to two main drivers. First, Mr. Cooper loan officers were immediately integrated onto Rocket's proprietary LOS system post-acquisition, leveraging Rocket's CRM, marketing, and AI tools for leads. Second, the successful transfer of 600,000 loans to a single united servicing platform enabled significant efficiencies and propensity model gains. He stated that the integration is ahead of plan, and recapture goals are being met faster than anticipated, especially benefiting from current favorable interest rates.

Don Fandetti asked for more details and quantification regarding the better-than-expected recapture rates on the Mr. Cooper loan book.

Answer

CFO Brian Brown attributed the strong recapture to two main drivers: immediately integrating Mr. Cooper loan officers onto Rocket's proprietary LOS system and leveraging CRM, marketing, and AI tools, and the successful transfer of 600,000 Mr. Cooper loans to a united servicing platform. He noted that the integration is ahead of plan, and the timing is opportune as cooperating rates allow consumers to save money, driving high intent for refinancing.

Don Fandetti with Wells Fargo inquired about the projected pace of growth for Starwood Property Trust's commercial real estate (CRE) loan portfolio throughout 2026, specifically asking about the expected volume and the return profile of new originations compared to historical levels. He also asked about the near-term expectations for credit migration, acknowledging the company's long-term asset management strategy.

Answer

President and Managing Director Jeffrey DiModica stated that the CRE loan portfolio is expected to exceed $17 billion in Q1 2026, with origination volume anticipated to be at least $6.5 billion for the year, driven by increased maturities, lower rates, and higher transaction activity. He highlighted Starwood's competitive advantage in cost of funds and strong bank relationships. Regarding credit migration, Mr. DiModica explained their bespoke approach to asset resolution, evaluating each situation individually for optimal shareholder value, and expressed a goal to resolve most of $1 billion in non-accruals this year. Chairman and CEO Barry Sternlicht emphasized their "long ball" strategy, taking back and repositioning assets for long-term value rather than immediate liquidation, citing successful redevelopments and the inherent value of their first mortgages. He also noted challenges in the multifamily market but expressed confidence in their strong attachment points.

Don Fandetti inquired about Starwood Property Trust's strategy for increasing its commercial real estate (CRE) loan portfolio in Q1 2026, the anticipated pace of growth throughout the year, and how the return profile of new originations compares to historical performance. He also asked about near-term credit migration expectations, particularly given the company's long-term asset management approach.

Answer

Jeffrey DiModica, President and Managing Director, confirmed expectations for the CRE loan portfolio to exceed $17 billion in Q1 2026, driven by increased liquidity and market opportunities from maturities and lower rates. He highlighted Starwood Property Trust's cost of funds advantage and strong bank relationships. DiModica also discussed the bespoke approach to credit resolution, emphasizing present value analysis for each asset rather than forced liquidation, with a goal to resolve most of $1 billion this year. Barry Sternlicht, Co-Founder, Chairman, and CEO, added that taking back assets allows for repositioning and re-tenanting, which can yield better long-term value than immediate sales, citing successful redevelopments.

Don Fandetti of Wells Fargo inquired about the health of the premium consumer in the U.S. consumer and small business segments for 2026, asking if the current 9% growth rate is a steady state or if acceleration is possible given potential stimulus.

Answer

CEO Steve Squeri expressed bullishness for the consumer segment, citing strong momentum from the Platinum and Gold card launches and high card member engagement, particularly with the Platinum app. He highlighted a 9% increase in overall restaurant spending and a 20% increase at Resy restaurants, driven by premium cardholders. While not projecting growth beyond 9%, he affirmed strong momentum.

Don Fandetti asked for insights into the 2026 outlook for U.S. consumer and small business, the health of the premium consumer segment, and whether growth could accelerate beyond the current 9% given potential stimulus.

Answer

Steve Squeri, Chairman and CEO, expressed bullishness on the consumer side due to significant uplift in Platinum over the holidays and strong momentum from Platinum and Gold launches. He highlighted the Platinum app's role in driving engagement, citing a 20% increase in Resy restaurant spending, and expects Platinum acquisition momentum to continue, though not projecting beyond 9% growth.

Don Fandetti from Wells Fargo asked for more details on the Walmart partnership, inquiring about its rollout, whether it's expected to be a steady ramp-up in loan growth, and any key milestones or insights into its progress.

Answer

CFO Brian Wenzel reported that the Walmart partnership is progressing "incredibly well," fully launched with strong early results and the fastest growth for a de novo program. He highlighted its leading-edge technology (One Pay app, API stack), a strong value proposition (5% cash back for Walmart+ members), effective digital and in-store placement, and strong alignment in the deal structure, expressing encouragement for future growth.

Don Fandetti asked for more details on the Walmart partnership, specifically if it will be a steady ramp-up in loan growth, any milestones, and how the rollout is progressing.

Answer

CEO Brian Doubles described the Walmart program as incredibly successful, fully launched, and the fastest-growing de novo program ever. He highlighted its leading-edge tech (One Pay app, API stack), strong value proposition (5% cash back for Walmart+ members), good digital and in-store placement, and strong alignment with Walmart.

Don Fandetti asked about potential portfolio acquisitions or new de novo programs, and whether the Versatile Credit acquisition is a one-off or indicative of more bolt-on technology acquisitions.

Answer

Brian Doubles (President and CEO) noted a strong pipeline across all platforms, including existing portfolios and de novo opportunities, emphasizing disciplined pricing and winning based on capabilities. He described Versatile Credit as a great, relatively small acquisition that leverages Synchrony's scale to drive higher approval rates and non-lending revenue, fitting the type of acquisition they seek. Brian Wenzel (EVP and CFO) added that Versatile Credit has attractive IRR/ROIC and a reasonable payback on tangible book value.

Don Fandetti asked about the competitive landscape in the card industry, with many big banks, regionals, and fintechs seeking market share, and whether Capital One can continue to grow its card loans or might consider slowing down.

Answer

Chairman and CEO Richard Fairbank acknowledged the intense competition in the card industry, driven by existing players and fintechs, especially when the economy is strong. He characterized the marketplace as rational, noting that he does not observe 'reckless credit.' Mr. Fairbank affirmed that Capital One sees good opportunities and is 'leaning in' to capture them, despite higher investment 'table stakes' due to the competitive environment.

Don Fandetti asked about the competitive landscape in the card industry, with many banks and fintechs seeking market share, and whether Capital One expects to grow its card loans in this environment or consider slowing down.

Answer

Chairman and CEO Richard Fairbank acknowledged the intense competition from big players and fintechs in the card industry, noting increased investments and product refreshes. However, he characterized the marketplace as 'rational,' without 'reckless credit,' and expressed confidence that Capital One can lean in and capture opportunities despite higher investment 'table stakes,' believing it remains a good marketplace.

Don Fandetti asked about the growth prospects of the Aspire non-QM market and whether a shrinking GSE footprint could further boost this segment.

Answer

President Dash Robinson explained that the non-QM market has significant organic growth runway due to the increasing number of consumers with non-traditional income and greater awareness among originators. He highlighted the role of technology, particularly AI, in improving underwriting efficiency and noted that DSCR loans (smaller balanced rental loans) comprise about 40% of Aspire's volume, benefiting from growing rentership. Dash Robinson added that while a GSE footprint reduction would benefit all Redwood businesses, especially Sequoia, the Aspire TAM is growing for independent reasons.

Don Fandetti asked about Blackstone Mortgage Trust's observations on office market fundamentals, particularly in light of recent loan upgrades, and whether the company might be over-reserved in its office book. He also inquired about the outlook for credit migration from category three to four.

Answer

Austin Peña, EVP of Investments, confirmed stability and improvement in office fundamentals, citing leasing activity and increased transaction volumes, and stated that reserve levels are appropriate based on detailed asset-by-asset analysis. Tim Johnson, Chair of the Expertise Board and Global Head of BREDS, added that the direction of credit travel is clearly positive with no new impairments, and the company has resolved 70% of its impaired loans with good visibility on further resolutions.

Don Fandetti with Wells Fargo asked about Blackstone Mortgage Trust's observations on office market fundamentals, specifically noting six loan upgrades, and whether the company might be over-reserved in its office loan book. He also inquired about the near-term outlook for credit migration, particularly movements from category three to four, and if the company believes it is in a steady state regarding credit performance.

Answer

Austin Peña, EVP of Investments, confirmed seeing stability and improvement across the office sector, driven by leasing activity, which led to six office loan upgrades and two removals from the watchlist. He noted increasing transaction activity and capital returning to the sector. He stated that the company's reserve levels are appropriate, based on a detailed asset-by-asset analysis. Tim Johnson, Chairman and Incoming CEO, affirmed that the direction of credit is clearly positive with no new impairments, and the company has resolved 70% of its impaired loans with good visibility on further resolutions, indicating confidence in the overall credit performance path.

Don Fandetti asked if the recent credit and ABS market volatility would impact gain on sale margins for Q4-Q1 production, and if the 7% margin achieved this quarter could be considered a good base-level run rate.

Answer

CFO Pete Graham explained that gain on sale margins vary with different phases in the market cycle, noting that successful loan sales have historically ranged in the mid-to-high single digits. He stated that margins are primarily tied to general market spreads at the time of execution and can also be influenced by the purchaser's intended leverage takeout structure.

Don Fandetti asked about the potential impact of recent credit and ABS market volatility on gain on sale margins for Q4-Q1 production, and whether the 7% margin achieved this quarter could serve as a reliable base-level run rate.

Answer

CFO Pete Graham explained that gain on sale margins fluctuate with market spreads and the implied structure used by purchasers, noting that historical sales have typically fallen within a mid to high single-digit range, with some variability.