Book value

Annaly (NLY) Q4 Earnings Best Estimates, NII & Lower Book Value – Feb 10, 2022

Annaly Capital Management, Inc. (NLY Free Report) reported earnings available for distribution (EAD) per share of 28 cents in the fourth quarter of 2021, which beat Zacks’ consensus estimate of 26 cents. The figure, however, compares unfavorably to 30 cents in the prior year quarter.

Net interest income (NII) was $361 million, beating Zacks consensus estimate of $357 million. This figure decreased by 16.6% year-on-year.

With funding costs still low, Annaly experienced an increase in net interest margin. However, NLY saw a year-over-year decline in book value per share (BVPS) and average return on interest-earning assets.

For the full year, Annaly reported EAD per share of $1.16, up 5.5% from the 2020 figure. Net income also beat Zacks consensus estimate of 1.14 $ per share.

The NII for the full year was $1.73 billion, up 30% from the number reported a year ago. Additionally, the 2021 NII was in line with the Zacks consensus estimate.

In the headlines

At the end of the fourth quarter, Annaly had $89.2 billion in total assets, with 91% of invested assets in the Agency’s portfolio. At the end of the quarter, unencumbered assets stood at $9.3 billion.

During the quarter under review, the average return on interest earning assets (excluding premium amortization adjustment or PAA) was 2.63%, down from 2.8% in the prior year quarter . The average economic cost of interest-bearing liabilities was 0.75%, down from 0.87%.

Net interest spread (excluding PAA) of 1.88% for the fourth quarter fell from 1.93% in the prior year quarter. Nevertheless, the net interest margin (excluding PAA) in the current quarter was 2.03%, compared to 1.98% in the fourth quarter of 2020.

Annaly’s BVPS was $7.97 as of December 31, 2021, down sequentially from $8.39. Additionally, BVPS compares unfavorably at $8.92 as of December 31, 2020. At the end of the current quarter, Annaly’s economic capital ratio was 14.4%, compared to 13.6% in the year-ago quarter. previous.

For the December quarter, the constant weighted average real prepayment rate was 21.4%, down sequentially from 23.1%.

Economic leverage was 5.7X as of December 31, 2021, compared to 5.8X, sequentially, and 6.2X in the prior year quarter. Annaly generated an annualized EAD return on average equity (excluding PAA) of 13.1% in the fourth quarter, down from 13.03% in the prior year quarter.

Annaly currently wears a Zacks Rank #3 (Hold). You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Competitive landscape

On January 31, 2022, AGNC Investment Corp. (AGNC Free report) released the results for the fourth quarter of 2021.

AGNC’s net spread and dollar earnings per common share (excluding estimated “catch-up” bonus amortization costs) of 75 cents per share beat Zacks’ consensus estimate of 66 cents. The reported figure was stable with the fourth quarter 2020 figure.

We now look forward to the release of results from other mortgage REITs, such as Starwood Realty Trust (STWD free report) and Invesco Mortgage Capital (IVR Free Report), which is scheduled to report on February 25 and 17, respectively.

Starwood Property carries a Zacks Rank #2 (Buy), while Invesco Mortgage has a Zacks Rank #3 (Hold) at present.

The Zacks consensus estimate for Starwood Property’s fourth quarter 2021 earnings has moved 1.9% north to 53 cents over the past month. The same goes for Invesco Mortgage’s earnings for the December 2021 quarter, which were flat at 10 cents over the past month.