Starwood Property Trust Reports Mixed Q3 Results, Net Income Up 40% Amid Revenue Decline

Starwood Property Trust, Inc. (STWD) reported its financial results for the third quarter and the nine months ended September 30, 2024, highlighting a mixed performance across its segments. Total revenues for the third quarter were $479.5 million, a decrease from $521.5 million in the same period last year. For the nine months, revenues totaled $1.49 billion, down from $1.53 billion in the prior year. The decline in revenue was primarily attributed to reduced interest income from loans, particularly in the Commercial and Residential Lending Segment, which saw a decrease of $68.5 million to $1.2 billion compared to the same period in 2023.

Net income for the third quarter increased to $72.2 million, up from $51.4 million in the prior year, while net income for the nine months was $309.8 million, a slight decrease from $333.5 million in 2023. The increase in quarterly net income was driven by a significant rise in total other income, which reached $105.7 million compared to $38.0 million in the previous year, largely due to favorable changes in the fair value of residential loans and foreign currency gains.

The company’s total assets as of September 30, 2024, were $64.2 billion, down from $69.5 billion at the end of 2023. Total liabilities also decreased to $57.0 billion from $62.5 billion, resulting in stockholders' equity rising to $6.54 billion from $6.25 billion. Cash and cash equivalents increased significantly to $357.9 million from $194.7 million, reflecting improved liquidity.

In terms of strategic developments, Starwood completed the sale of 16 retail properties for $387.1 million in February 2024, contributing to a recognized gain of $92 million. The company also reported a notable increase in credit loss provisions, which rose to $66.4 million for the third quarter, compared to $52.6 million in the same period last year. This increase reflects the ongoing challenges in the market, particularly in the context of elevated interest rates impacting borrowers.

The Commercial and Residential Lending Segment reported revenues of $385.5 million for the third quarter, down from $393.6 million in the previous quarter, primarily due to a decrease in interest income. The Infrastructure Lending Segment saw a slight revenue increase to $65.4 million, while the Property Segment reported revenues of $16.6 million, reflecting a modest increase.

Overall, while Starwood Property Trust demonstrated resilience in net income and maintained a strong liquidity position, it faced challenges in revenue generation and credit loss provisions amid a fluctuating economic environment.