Annaly Capital Management (NLY) Q2 2024 earnings summary

Executive summary

• Delivered a 0.9% economic return for Q2 2024 and 5.7% for the first half, with earnings available for distribution (EAD) of $0.68 per share, covering the $0.65 dividend and supporting a 13.6% yield.

• Book value per share declined to $19.25 from $19.73 in the prior quarter.

• Maintained prudent leverage at 5.8x and strong liquidity, with $6.3 billion in assets available for financing.

• Agency MBS and MSR portfolios grew, with increased focus on higher coupon, prepayment-protected collateral and low delinquencies.

• Residential credit and Onslow Bay channels saw record loan locks and settlements, with $4.1 billion in Q2 and $6.7 billion in YTD securitizations.

Financial highlights

• GAAP net loss per share was ($0.09) for Q2 2024; EAD per share rose to $0.68 from $0.64 sequentially.

• Net interest margin (excluding PAA) increased to 1.58% from 1.43% quarter-over-quarter.

• Annualized EAD return on average equity was 13.36% in Q2 2024.

• Average yield on interest earning assets (excluding PAA) rose to 5.14%.

• Dividend yield stood at 13.6% based on the Q2 dividend and period-end share price.

Outlook and guidance

• Management expects less restrictive monetary policy and gradual Fed rate cuts in H2 2024, supporting Agency MBS and fixed income demand.

• Plans to grow residential credit and MSR businesses opportunistically while maintaining current capital allocation.

• Expects expenses to normalize and OPEX to equity ratios to align with historical levels.

• Agency MBS spreads remain above long-term averages, offering attractive risk-adjusted returns.

• Residential credit fundamentals remain constructive, though regional disparities and consumer strength are monitored.