Franklin BSP Realty Trust (FBRT)

Commercial real estate lender Franklin BSP Realty Trust (NYSE:FBRT) reported Q3 CY2025 results topping the market’s revenue expectations, with sales up 79.3% year on year to $89.55 million. Its non-GAAP profit of $0.22 per share was 25.4% below analysts’ consensus estimates.

Company Overview

Operating as a specialized real estate investment trust (REIT) with roots dating back to 2012, Franklin BSP Realty Trust (NYSE:FBRT) originates and manages a diversified portfolio of commercial real estate debt investments secured by properties in the United States and abroad.

Thrifts & Mortgage Finance institutions operate by accepting deposits and extending loans primarily for residential mortgages, earning revenue through interest rate spreads (difference between lending rates and borrowing costs) and origination fees. The industry benefits from demographic tailwinds as millennials enter prime homebuying age, technological advancements streamlining the loan approval process, and potential interest rate stabilization improving affordability. However, significant headwinds include net interest margin compression during rate volatility, increased competition from fintech disruptors offering digital-first experiences, mounting regulatory compliance costs, and potential housing market corrections that could impact loan portfolios and default rates.

Franklin BSP Realty Trust competes with other commercial mortgage REITs such as Blackstone Mortgage Trust (NYSE:BXMT), Starwood Property Trust (NYSE:STWD), and KKR Real Estate Finance Trust (NYSE:KREF), as well as traditional banks and other financial institutions that provide commercial real estate financing.

From lending activities to service fees, most banks build their revenue model around two income sources. Interest rate spreads between loans and deposits create the first stream, with the second coming from charges on everything from basic bank accounts to complex investment banking transactions. Luckily, Franklin BSP Realty Trust’s revenue grew at an incredible 19.2% compounded annual growth rate over the last five years. Its growth beat the average banking company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. Franklin BSP Realty Trust’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 3.1% over the last two years was well below its five-year trend. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Franklin BSP Realty Trust reported magnificent year-on-year revenue growth of 79.3%, and its $89.55 million of revenue beat Wall Street’s estimates by 10%.

Since the company recorded losses on certain securities, it generated more net interest income than revenue (a 1.1x multiple of its revenue to be exact) during the last five years, meaning Franklin BSP Realty Trust lives and dies by its lending activities because non-interest income barely moves the needle.

While banks generate revenue from multiple sources, investors view net interest income as the cornerstone - its predictable, recurring characteristics stand in sharp contrast to the volatility of non-interest income.

The balance sheet drives banking profitability since earnings flow from the spread between borrowing and lending rates. As such, valuations for these companies concentrate on capital strength and sustainable equity accumulation potential.

Because of this, tangible book value per share (TBVPS) emerges as the critical performance benchmark. By excluding intangible assets with uncertain liquidation values, this metric captures real, liquid net worth per share. Traditional metrics like EPS are helpful but face distortion from M&A activity and loan loss accounting rules.

Franklin BSP Realty Trust’s TBVPS declined at a 6.8% annual clip over the last five years. A turnaround doesn’t seem to be in sight as its TBVPS also dropped by 10.8% annually over the last two years ($15.23 to $12.11 per share).

Return on equity (ROE) reveals the profit generated per dollar of shareholder equity, which represents a key source of bank funding. Banks maintaining elevated ROE levels tend to accelerate wealth creation for shareholders via earnings retention, buybacks, and distributions.

Over the last five years, Franklin BSP Realty Trust has averaged an ROE of 5.5%, uninspiring for a company operating in a sector where the average shakes out around 7.5%.

We were impressed by how significantly Franklin BSP Realty Trust blew past analysts’ revenue expectations this quarter. On the other hand, its net interest income missed and its EPS fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock remained flat at $10.66 immediately after reporting.

Updated: December 3, 2025 at 11:43 PM EST

Before investing in or passing on Franklin BSP Realty Trust, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

Franklin BSP Realty Trust falls short of our quality standards. Although its revenue growth was impressive over the last five years and is expected to accelerate over the next 12 months, its TBVPS has declined over the last five years. And while the company’s projected EPS for the next year implies the company will start generating shareholder value, the downside is its declining EPS over the last two years makes it a less attractive asset to the public markets.

Franklin BSP Realty Trust’s P/B ratio based on the next 12 months is 0.7x. While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $14.38 on the company (compared to the current share price of $10.52).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.