NLY-PG — Annaly Capital Management, Inc.

Annaly Capital Management (NLY-PG) Q3 2025 Earnings Call Summary

1. Key Financial Results and Metrics

• Economic Return: 8.1% for Q3 2025, bringing year-to-date return to 11.5%. Positive economic returns for eight consecutive quarters.
• Earnings Available for Distribution (EAD): $0.73 per share, consistent with Q2, exceeding the dividend of $0.70.
• Book Value per Share: Increased by 4.3% from $18.45 to $19.25.
• Net Interest Margin (NIM): Stable at 1.7% (ex-PAA).
• Leverage: Economic leverage ratio at 5.7x, slightly lower than the previous quarter.
• Repo Financing: Added $8.6 billion of repo principal at attractive spreads, maintaining a healthy average repo days of 49.

2. Strategic Updates and Business Highlights

• Agency Portfolio: Grew to over $87 billion in market value, up 10% quarter-over-quarter, with significant capital raised deployed in Agency MBS.
• Residential Credit: Portfolio increased to $6.9 billion, with record-setting volumes in locks and fundings. Annaly remains a top issuer in the residential credit market.
• Mortgage Servicing Rights (MSR): Increased by $215 million to $3.5 billion, with stable cash flows and a new partnership with PennyMac Financial Services for subservicing.
• Capital Raise: Successfully raised $1.1 billion in equity, including $800 million through an ATM program.

3. Forward Guidance and Outlook

• Market Positioning: Expect continued strong technical support for Agency MBS due to anticipated Fed cuts and healthy fixed income demand.
• Investment Strategy: Plans to increase allocations to Residential Credit and MSR sectors while maintaining a diversified housing finance model.
• Economic Environment: Anticipates modestly lower policy rates and a stable macroeconomic backdrop, with a focus on maintaining high credit quality.

4. Challenges and Points of Concern

• Labor Market Weakness: Hiring slowed significantly, with concerns about future employment sentiment.
• Housing Market Pressures: Year-over-year home price appreciation is flat, with potential for modest depreciation due to elevated mortgage rates impacting affordability.
• Interest Rate Volatility: Although realized volatility has decreased, the potential for rate fluctuations remains a concern.
• Competition for Deposits: Increased competition may affect margins and funding costs.

5. Notable Q&A Insights

• Investment Preferences: Management indicated a preference for Agency investments despite tighter spreads, citing strong fundamentals and technical improvements.
• MSR Supply: Increased supply from large participants, with stable pricing, provides opportunities for future growth in the MSR portfolio.
• Duration Management: The company maintains a close-to-zero duration gap, reflecting a cautious approach amid uncertain rate environments.
• Prepayment Sensitivity: The OBX portfolio has shown slower-than-expected prepayment speeds, positively impacting returns.

Overall, Annaly Capital Management reported solid financial performance in Q3 2025, with a positive outlook driven by strategic investments and market positioning, while remaining vigilant of macroeconomic challenges and market dynamics.