Keefe, Bruyette & Woods upgraded PennyMac Mortgage Investment Trust (NYSE:PMT) shares to Outperform from Market Perform in a recent note on the expectation that return on equity will continue to increase should it keep deploying capital in mortgage servicing rights (MSRs).
PMT gained 2.6% minutes after the opening bell.
Analyst Bose George expects PennyMac’s (PMT) ROE to advance to about 10% by 2026. “We believe the credit risk on the [government-sponsored enterprise credit risk transfer] is very strong given the seasoned nature of much of that collateral, and we expect mortgage servicing to generate attractive returns,” he wrote in a note.
Do note that PMTs exposure to MSR as a percentage of equity is comparable to the majority of large mortgage lenders, he pointed out. “We expect the company to continue to deploy capital in MSRs, which should be accretive to ROEs.”
George’s Outperform rate diverges from the average sell-side analyst rating of Hold.
