Annaly (NLY) Tops Q2 Earnings Estimates, Reports Negative NII
Annaly Capital Management, Inc. NLY reported second-quarter earnings available for distribution (EAD) per average share of 72 cents, which surpassed the Zacks Consensus Estimate of 69 cents. The figure declined from $1.22 in the year-ago quarter.
NLY registered year-over-year declines in book value per share (BVPS) and margin, while the average yield on interest-earning assets improved.
Per management, “As we have noted for some time, Annaly is well-prepared for volatility and strategically managed our leverage position during the quarter given uncertainties emanating from the regional banking turbulence and debt ceiling negotiations. These efforts enabled book value to end the quarter effectively unchanged while our portfolio out-earned our dividend. Overall, we have generated a 6% economic return for the first half of the year despite substantial market volatility – demonstrating the stability and efficacy of our diversified housing finance model.”
Inside the Headlines
Net interest income (NII) was negative $31.96 million in the reported quarter against the Zacks Consensus Estimate of $262 million. The figure plunged year over year from $475.1 million.
At the second-quarter end, Annaly had $89.3 billion of total assets, with $71.4 billion invested in the Agency portfolio. At the end of the quarter, unencumbered assets were $6 billion.
In the reported quarter, the average yield on interest-earning assets (excluding premium amortization adjustment or PAA) was 4.27%, up from the prior-year quarter’s 3.58%. The average economic costs of interest-bearing liabilities were 2.77%, increasing from 1.11%.
Net interest spread (excluding PAA) of 1.45% in the second quarter fell from 1.76% in the prior-year quarter. Also, the net interest margin (excluding PAA) was 1.66% compared with 2.20% in second-quarter 2022.
Annaly’s BVPS was $20.73 as of Jun 30, 2023, down from $23.59 in the prior-year quarter. At the end of the reported quarter, the company’s economic capital ratio was 14.3%, down from 13% in the prior-year quarter.
In the second quarter, the weighted average actual constant prepayment rate was 7%, sequentially up from 5.5%.
Economic leverage was 5.8X as of Jun 30, 2023, down from 6.4X sequentially and 6.6X from the prior-year quarter. Annaly generated an annualized EAD return on average equity (excluding PAA) of 13.22% in the second quarter, down from the prior-year quarter’s 17.49%.
NLY currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Annaly Capital Management Inc Price, Consensus and EPS Surprise
Annaly Capital Management Inc price-consensus-eps-surprise-chart | Annaly Capital Management Inc Quote
Competitive Landscape
AGNC Investment Corp.’s AGNC second-quarter 2023 net spread and dollar roll income per common share (excluding estimated "catch-up" premium amortization costs) of 67 cents beat the Zacks Consensus Estimate of 58 cents. However, the bottom line declined 19.3% from the prior-year quarter.
AGNC’s adjusted net interest and dollar roll income (excluding estimated "catch-up" premium amortization costs) of $493 million remained flat sequentially.
AGNC sports a Zacks Rank of 1 at present.
Starwood Property Trust STWD is scheduled to report quarterly figures on Aug 3. Over the past month, the Zacks Consensus Estimate for STWD’s quarterly earnings has been unchanged at 48 cents, implying a 5.88% fall from the prior-year reported number.
STWD carries a Zacks Rank of 2 at present.
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