Annaly Capital Management ((NLY)) has held its Q4 earnings call. Read on for the main highlights of the call.
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In their most recent earnings call, Annaly Capital Management expressed a broadly positive sentiment, underscored by robust economic returns and growth across significant segments such as Residential Credit and MSR portfolios. The company highlighted a noteworthy increase in earnings available for distribution and a successful capital raising initiative. Despite these positives, challenges such as a decrease in book value per share and losses in certain portfolios were acknowledged.
Strong Economic Return
Annaly Capital Management reported an economic return of 1.3% for the fourth quarter of 2024 and an impressive 11.9% for the full year. This performance reflects the strength and diversity of their portfolio amidst volatile fixed income markets, showcasing their ability to navigate economic challenges effectively.
Increase in Earnings Available for Distribution
The earnings available for distribution saw an increase, rising by $0.06 to $0.72 per share. This growth was primarily driven by lower financing costs and the effects of a steepening yield curve, indicating a favorable shift in financial conditions.
Successful Capital Raising
Annaly successfully raised over $400 million in accretive common equity during the fourth quarter, contributing to a total of $1.6 billion in capital raised throughout 2024. This capital influx supports the company’s ongoing growth and strategic initiatives.
Growth in Residential Credit Portfolio
The Residential Credit portfolio experienced significant growth, increasing by approximately $500 million quarter-over-quarter. This growth was driven by an organic strategy focusing on whole loan and retained OBX assets, indicating a strong market position.
MSR Portfolio Growth
The MSR portfolio ended the fourth quarter with a market value of $3.3 billion, representing a substantial 25% increase year-over-year. This growth demonstrates the company’s successful management and expansion efforts in this area.
Decrease in Book Value Per Share
Despite the positive performance in other areas, Annaly saw a 2% decrease in book value per share, dropping from $19.54 in the previous quarter to $19.15. This decline highlights some of the challenges faced in the current market environment.
Losses on Agency and Residential Credit Portfolios
Annaly incurred notable losses on their Agency MBS portfolio, amounting to $4.14 per share, and on their Residential Credit portfolio, equivalent to $0.26 per share. These losses underscore the volatility and risks inherent in these investment segments.
Forward-Looking Guidance
Looking ahead, Annaly Capital Management remains optimistic about their strategies and anticipates continued growth into 2025. The company plans to maintain a conservative hedge profile amidst ongoing market volatility, focusing on strengthening their diversified housing finance portfolio. With decreased economic leverage at 5.5x and strategic capital deployment in lower-levered credit and MSR businesses, Annaly is poised for robust performance in the coming year.
In conclusion, Annaly Capital Management’s earnings call conveyed a generally positive outlook, bolstered by strong economic returns and strategic growth in key portfolios. While challenges such as decreased book value and portfolio losses were noted, the company’s forward-looking strategies and capital management initiatives provide a solid foundation for future growth.
