What drove KREF's EPS surge in Q3 2024?

KKR Real Estate Finance Trust Inc. (KREF) experienced a negative EPS surge, with an EPS of -$0.19 for Q3 2024, primarily driven by several key factors:

1. **Increased Provision for Credit Losses**: The company reported higher provision for credit losses, which significantly impacted its net income. This was due to the downgrade of two loans, resulting in a CECL allowance increase and a corresponding decrease in net income.
2. **Loan Downgrades and Risk Rating Increases**: KREF downgraded two loans to a risk rating of five, including a life science asset and a multifamily asset, which led to a substantial increase in the CECL reserve. This reserve increase, amounting to $36 million or $0.52 per share, directly contributed to the negative EPS.
3. **Market Conditions and Office Loan Exposure**: The company's office loan exposure remains a concern, with office assets representing approximately 18% of the loan portfolio. The limited liquidity in the office market further adds to the pressure on KREF's financial performance.

In summary, KREF's EPS surge in Q3 2024 was primarily driven by increased provision for credit losses, loan downgrades, and market conditions, particularly the office loan exposure.

|code|Ticker|Name|Date|Diluted EPS YoY|Diluted EPS|market_code|
|---|---|---|---|---|---|---|
|KREF|KREF.N|KKR Real Estate|2024 Q1|71.11111111111111|-0.13|169|
|KREF|KREF.N|KKR Real Estate|2024 Q2|178.37837837837836|0.29|169|
|KREF|KREF.N|KKR Real Estate|2024 Q3|-161.29032258064518|-0.19|169|