Annaly Capital Management Inc (NLY) Reports Mixed Results Amidst Market Volatility
Book Value Per Share: $19.44 as of December 31, 2023.
GAAP Net Loss: ($0.88) per average common share for Q4; ($3.61) for full year 2023.
Earnings Available for Distribution (EAD): $0.68 per average common share for Q4; $2.86 for full year 2023.
Economic Return: 10.1% for Q4; 6.0% for full year 2023.
GAAP Leverage: Decreased to 6.8x from 7.1x in the prior quarter.
Dividend: Declared quarterly common stock cash dividend of $0.65 per share.
Portfolio Adjustments: Agency portfolio decreased by 4%; Residential Credit portfolio increased by 9%.
On February 7, 2024, Annaly Capital Management Inc (NYSE:NLY) released its 8-K filing, detailing the financial results for the fourth quarter and full year ended December 31, 2023. The company, a leading American mortgage real estate investment trust, navigated a challenging year marked by volatility in the fixed income markets. Annaly Capital Management Inc (NYSE:NLY) manages a diverse portfolio of real estate-related investments, focusing on generating net income for distribution to its stockholders and optimizing returns through prudent management.
Financial Performance and Challenges
Annaly Capital Management Inc (NYSE:NLY) reported a GAAP net loss of ($0.88) per average common share for the fourth quarter and ($3.61) per average common share for the full year 2023. Despite the net loss, the company's Earnings Available for Distribution (EAD) were $0.68 per average common share for the quarter and $2.86 per average common share for the full year. The economic return stood at 10.1% for the fourth quarter and 6.0% for the full year, reflecting the resilience of Annaly's diversified housing finance model amidst the interest rate declines and strong performance of mortgage-related assets.
The company's book value per common share increased to $19.44, up from $18.25 in the previous quarter, while GAAP leverage decreased to 6.8x from 7.1x, indicating a reduction in the company's debt relative to equity. The declared quarterly common stock cash dividend of $0.65 per share demonstrates the company's commitment to returning value to shareholders.
Portfolio Adjustments and Strategic Growth
Annaly's Agency portfolio, which includes highly liquid assets, decreased modestly by 4% to $65.7 billion, reflecting strategic adjustments such as the rotation up in coupon and reduction of TBA position. The Residential Credit portfolio, on the other hand, grew by 9% to $5.7 billion, driven by strong performance from the company's correspondent channel. The Mortgage Servicing Rights (MSR) portfolio also saw an 18% increase quarter-over-quarter to $2.7 billion in assets.
Throughout 2023, Annaly focused on shifting its Agency portfolio up in coupon and increased its Residential Credit portfolio by 14% year-over-year, highlighting the company's strategic growth in these areas. The company's proactive management of leverage amidst market volatility resulted in a decrease in economic leverage from 6.3x at the end of 2022 to 5.7x at year-end.
Executive Commentary
Annaly delivered a 10.1% economic return in the fourth quarter as interest rates declined and mortgage-related assets exhibited strong performance," said David Finkelstein, Annalys CEO and CIO. "We view this performance as a testament to Annalys diversified housing finance model and prudent portfolio and risk management."
Importantly, we continued to make progress in expanding our capabilities and leadership across housing finance as we further scaled our Residential Credit and MSR businesses last year," Finkelstein added, highlighting the company's strategic advancements.
Looking Forward
Annaly Capital Management Inc (NYSE:NLY) remains optimistic about the future, particularly with the potential shift to a more accommodative monetary policy in 2024. The company's diversified investment strategies and prudent risk management position it well to navigate the evolving economic landscape and continue delivering value to its shareholders.
For a more detailed analysis of Annaly Capital Management Inc (NYSE:NLY)'s financial results, including the full financial tables and additional commentary, please refer to the 8-K filing and the upcoming earnings conference call scheduled for February 8, 2024.
Explore the complete 8-K earnings release (here) from Annaly Capital Management Inc for further details.
This article first appeared on GuruFocus.
