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Annaly (NLY) Q4 Earnings Top Estimates, NII & Book Value Dip

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Annaly Capital Management, Inc. (NLY - Free Report) reported fourth-quarter 2021 earnings available for distribution (EAD) per share of 28 cents that surpassed the Zacks Consensus Estimate of 26 cents. The figure, however, compared unfavorably with the year-ago quarter’s 30 cents.

The net interest income (NII) was $361 million, surpassing the Zacks Consensus Estimate of $357 million. The figure declined 16.6% year over year.

With continued low financing costs, Annaly witnessed a rise in net interest spread. However, NLY registered a year-over-year decline in book value per share (BVPS) and the average yield on interest-earning assets.

For the full year, Annaly reported EAD per share of $1.16, up 5.5% from the 2020 figure. The bottom line also beat the Zacks Consensus Estimate of $1.14 per share.

Full-year NII stood at $1.73 billion, up 30% from the number reported a year ago. Moreover, 2021 NII was in line with the Zacks Consensus Estimate.

Inside the Headlines

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

In the reported quarter, the average yield on interest-earning assets (excluding premium amortization adjustment or PAA) was 2.63%, down from the prior-year quarter’s 2.8%. Average economic costs of interest-bearing liabilities were 0.75%, declining from 0.87%.

Net interest spread (excluding PAA) of 1.88% for the fourth quarter fell from 1.93% in the prior-year quarter. Nonetheless, the net interest margin (excluding PAA) in the reported quarter was 2.03% compared with 1.98% witnessed in fourth-quarter 2020.

Annaly’s BVPS was $7.97 as of Dec 31, 2021, sequentially down from $8.39. Moreover, BVPS compared unfavorably with $8.92 as of Dec 31, 2020. At the end of the reported quarter, Annaly’s economic capital ratio was 14.4%, rising from 13.6% in the prior-year quarter.

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

Economic leverage was 5.7X as of Dec 31, 2021, down from 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 the prior-year quarter’s 13.03%.

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

Competitive Landscape

On Jan 31, 2022, AGNC Investment Corp. (AGNC - Free Report) reported fourth-quarter 2021 results.

AGNC’s net spread and dollar roll income per common share (excluding estimated "catch-up" premium amortization costs) of 75 cents per share beat the Zacks Consensus Estimate of 66 cents. The reported figure was flat with the fourth-quarter 2020 figure.

We now look forward to the earnings releases of other mortgage REITs, such as  Starwood Property Trust (STWD - Free Report) and Invesco Mortgage Capital (IVR - Free Report) , scheduled to report on Feb 25 and Feb 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 fourth-quarter 2021 earnings of Starwood Property has moved 1.9% north to 53 cents over the past month. The same for Invesco Mortgage’s December-quarter 2021 earnings has been unchanged at 10 cents over the past month.