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Annaly (NLY) Q2 Earnings Beat Estimates, NII & Book Value Dip

Zacks Equity Research
·3 min read

Annaly Capital Management, Inc. NLY reported second-quarter 2021 earnings available for distribution (EAD), formerly known as core earnings per share excluding premium amortization adjustment (“PAA”), of 30 cents that surpassed the Zacks Consensus Estimate of 27 cents. The figure compared favorably with the year-ago quarter’s 27 cents.

Net interest income (NII) was $322.9 million, lagging the Zacks Consensus Estimate of $412.3 million. The figure declined 19% year over year.

While continued record-low financing costs and higher average yield on interest-earning assets supported Annaly, the company registered a sequential decline in book value per share (BVPS).

Annaly is on track to sell its commercial real estate business to Slate Asset Management for $2.33 billion. This will reduce exposure to the commercial real estate sector and provide the capacity to increase investments in the residential mortgage finance market. Subsequent to the second-quarter end, the company transferred the platform and the majority of assets, while the remaining are anticipated to be transferred by the end of third-quarter 2021.

Inside the Headlines

As of the second-quarter end, the company had $92.9 billion of total assets. At the end of second-quarter 2021, unencumbered assets stood at $9.6 billion.

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Annaly sequentially increased its capital allocation to the residential credit business from 13% to 19% in the second quarter, backed by $1 billion of whole-loan purchases.

In the reported quarter, average yield on interest-earning assets (excluding PAA) was 2.76%, up from the prior quarter’s 2.71%.Average GAAP cost of interest-bearing liabilities was 0.32%, sequentially declining from 0.42%.

Net interest spread (excluding PAA) of 1.93% for the second quarter rose from 1.84% in the prior quarter. Net interest margin (excluding PAA) in the reported quarter was 2.09% compared with 1.91% witnessed in first-quarter 2021.

Annaly’s BVPS was $8.37 as of Jun 30, 2021, sequentially down from $8.95. Also, BVPS compared unfavorably with $8.39 as of Jun 30, 2020. At the end of the reported quarter, the company’s economic capital ratio was 14.3%, rising from 13.7% in the prior quarter.

For the June-end quarter, weighted average actual constant prepayment rate was 26.4%, sequentially up from 23.9%.

Economic leverage was 5.8X as of Jun 30, 2021, down from 6.1X in the previous quarter. The company generated an annualized EAD return on average equity (excluding PAA) of 13.05 % in the second quarter, up from the prior quarter’s 12.53%.

Annaly currently carries a Zacks Rank #4 (Sell).

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 and EPS Surprise
Annaly Capital Management Inc Price, Consensus and EPS Surprise

Annaly Capital Management Inc price-consensus-eps-surprise-chart | Annaly Capital Management Inc Quote

Performance and Earnings Dates of other REITs

AGNC Investment Corp. AGNC reported second-quarter 2021 net spread and dollar roll income (excluding estimated catch-up premium amortization costs) of 76 cents per share, beating the Zacks Consensus Estimate of 64 cents. The reported figure improved from the second-quarter 2020 number of 58 cents.

We now look forward to the earnings releases of other mortgage REITs like Arbor Realty Trust, Inc. ABR and Chimera Investment Corporation CIM, which are scheduled to release their results on Jul 30 and Aug 4, respectively.


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Annaly Capital Management Inc (NLY) : Free Stock Analysis Report

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Zacks Investment Research