The following is a summary of the Annaly Capital Management, Inc. (NLY) Q1 2024 Earnings Call Transcript:
Financial Performance:
Annaly Capital Management reported a 4.8% economic return for the quarter with Earnings available for distribution (EAD) at $0.64 and leverage at the end of the quarter of 5.6 turns.
Book value per share increased to $19.73 due to asset spread appreciation with minimal interest rate exposure.
Net interest margin reduced to 143 basis points whereas net interest spread decreased by 13 basis points quarter-over-quarter.
Total cost of funds increased to 3.78%, but the company is content with the elevated cost of preferred capital in a floating rate environment.
The company is targeting mid-teen Return on Equities (ROE) based on retaining about 10% market value.
Business Progress:
The Residential Credit portfolio and Mortgage Servicing Rights (MSR) portfolio increased in market value to $6.2 billion and $2.7 billion respectively, with an additional commitment of over $100 million in market value acquisition slated for the next quarter.
The weighted average coupon of the Agency mortgage-backed securities (MBS) portfolio increased to 4.76%.
With the success of its established businesses—Agency, Residential Credit, and MSR—the company is prepared to tackle market volatility and potential improvements in rates due to more accommodative monetary policy.
The company anticipates benefits of the QT tapering process to the fixed income markets, including the Agency MBS market.
Given positive results from OBX securities inclusion in the balance sheet, the company is prepared to cover any market cheapening and continue trading.
Future changes may lead to the company taking over servicing instead of current outsourcing for efficiency.
More details: Annaly Capital Management Inc IR
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