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Annaly (NLY) Earnings & NII Beat Estimates in Q2, BVPS Up

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Annaly Capital Management, Inc. (NLY - Free Report) reported second-quarter 2020 core earnings, excluding premium amortization adjustment (PAA), of 27 cents per share, outpacing the Zacks Consensus Estimate of 23 cents. Moreover, the figure compared favorably with the year-ago quarter’s 25 cents.

Net interest income (NII) was $398.8 million, surpassing the Zacks Consensus Estimate of $205 million. It also compared favorably with the year-ago quarter’s $117.4 million.

The recovery in the mortgage-backed securities (MBS) sector, an accommodative monetary policy and fiscal relief supported the company’s performance. The company also registered sequential improvement in book value per share.

Quarter in Detail

Its Agency portfolio totaled $96.3 billion as of Jun 30, 2020. This increased around 5% from the first quarter end. Moreover, at second-quarter 2020 end, unencumbered assets stood at $7.9 billion.

In the reported quarter, average yield on interest-earning assets (excluding PAA) was 3.01%, up from the prior quarter’s 2.91%.

However, net interest spread (excluding PAA) of 1.72% for the second quarter rose from 1% reported in the prior quarter. Net interest margin (excluding PAA) in the quarter was 1.88% compared with 1.18% witnessed in first-quarter 2020.

Also, Annaly’s book value per share (BVPS) was $8.39 as of Jun 30, 2020, sequentially up 11.9%. However, book value per share compared unfavorably with $9.33 as of Jun 30, 2019. At the end of the June-end quarter, the company’s capital ratio was 13%, up from 12.3% reported at the end of first-quarter 2020.

Economic leverage was 6.4:1 as of Jun 30, 2020, down from 6.8:1 as of Mar 31, 2020. The company offered an annualized core return on average equity (excluding PAA) of 12.82% in the April-June period, up from the prior quarter’s 9.27%.


Low interest rates and stability in the repo market have reduced Annaly’s funding costs. Moreover, the company improved its liquidity and reduced leverage. Going forward, the company Agency portfolio is expected to enjoy attractive risk-adjusted returns within the fixed income markets and benefit from spread tightening.

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

Annaly currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

We now look forward to the earnings releases of other REITs like Healthcare Trust of America, Inc. (HTA - Free Report) , National Storage Affiliates Trust (NSA - Free Report) and Iron Mountain Incorporated (IRM - Free Report) . All three companies are scheduled to release quarterly numbers on Aug 6.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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