Annaly Capital Management Inc (NLY) Q3 2024 Earnings Call Highlights: Strong Equity Raise and ...

GuruFocus News
4 min read

In This Article:

  • Economic Return: 4.9% for Q3 and 10.5% year-to-date.

  • Economic Leverage: Decreased slightly to 5.7 turns.

  • Common Equity Raised: $1.2 billion since the beginning of Q3.

  • Agency MBS Portfolio Growth: Increased by over $4 billion notional.

  • Residential Credit Portfolio: Ended Q3 at $6.5 billion in economic market value.

  • Securitizations Priced: Six totaling $3.3 billion in UPB since the beginning of Q3.

  • Book Value Per Share: Increased from $19.25 to $19.54.

  • Dividend: $0.65 for Q3.

  • Earnings Available for Distribution: Exceeded the dividend, decreased modestly from Q2.

  • Average Asset Yields ex-PAA: Increased 11 basis points to 5.25% in Q3.

  • Net Interest Spread ex-PAA: Improved by 8 basis points to 1.32%.

  • Unencumbered Assets: Increased to $6.5 billion in Q3.

  • OpEx to Equity Ratio: Decreased to 1.48% for the quarter.

Release Date: October 24, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Annaly Capital Management Inc (NYSE:NLY) generated an economic return of 4.9% for Q3 and 10.5% year-to-date, exceeding their dividend.

  • The company successfully raised $1.2 billion of accretive common equity since the beginning of the third quarter, highlighting strong institutional demand.

  • Annaly's agency portfolio grew by over $4 billion notional, benefiting from price appreciation and strategic capital allocation.

  • The residential credit portfolio increased by $535 million quarter over quarter, driven by the growth of the correspondent platform.

  • Annaly's MSR portfolio remained stable with minimal valuation decline, demonstrating the durability of their holdings.

Negative Points

  • Interest rate volatility remains above pre-COVID levels, posing a challenge to Annaly's investment strategies.

  • The company's earnings available for distribution per share decreased modestly in Q3 compared to Q2, due to an increase in share count and higher preferred dividend expense.

  • Annaly's net interest margin ex-PAA declined by 6 basis points to 1.52%, indicating pressure on profitability.

  • The MSR portfolio experienced a slight decrease in valuation due to lower mortgage rates, impacting overall returns.

  • Political uncertainty and potential election outcomes present risks to Annaly's market positioning and strategy.

Q & A Highlights

Q: How is Annaly Capital Management managing the current market volatility and political uncertainty? A: David Finkelstein, CEO and CIO, explained that Annaly entered the quarter with minimal rate risk and slightly reduced leverage. They proactively managed the portfolio by selling approximately $2 billion in Agency MBS due to increased volatility and higher rates. Annaly is maintaining a conservative position, especially with the upcoming election, and is comfortable with their current duration exposure. They are prepared to manage rate and basis risk as the situation evolves.

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