Annaly Capital Management (NLY) Q1 2026 Earnings Call Summary

1Key Financial Results and Metrics

Economic Return: 1.5% for Q1 2026.

Earnings Available for Distribution (EAD): $0.76 per share, up $0.02 from the previous quarter.

Book Value per Share: Decreased by 1.9% to $19.82.

Leverage: Conservative at 5.7x.

Net Interest Margin: Improved slightly to 1.71%.

Securitization: Residential Credit gross issuance reached $79 billion, a 63% increase year-over-year.

2Strategic Updates and Business Highlights

Capital Allocation: Increased allocation to Residential Credit and Mortgage Servicing Rights (MSR), with respective capital allocations at 23% and 21% of total capital.

Portfolio Performance: Agency portfolio valued at $92 billion, representing 56% of the firm's capital. Residential Credit portfolio at $10.3 billion, and MSR portfolio at $4.2 billion.

Securitization Activity: Settled 8 securitizations totaling $4.7 billion in Q1, with a total of 12 transactions priced year-to-date.

Dynamic Capital Allocation: Shifted capital from Agency to Residential Credit and MSR in response to market conditions.

3Forward Guidance and Outlook

Market Positioning: Expectation of attractive risk-adjusted returns across investment strategies for the remainder of the year, supported by favorable market conditions.

Agency Spreads: Currently at reasonable levels, offering new money returns in the mid-teens.

Growth in Residential Credit: Continued focus on asset selection and credit quality, with plans to further expand MSR acquisitions.

4Bad News, Challenges, or Points of Concern

Geopolitical Risks: The conflict in the Middle East has introduced energy price shocks that could challenge U.S. economic performance.

Consumer Affordability: Rising oil and food prices may further squeeze consumers already facing slowing income growth.

Book Value Decline: Driven primarily by widening Agency spreads and costs associated with dynamic hedging.

Regulatory Environment: Uncertainty around bank capital rules and their impact on mortgage origination and market dynamics.

5Notable Q&A Insights

Bank Capital Rules: Changes may lead banks to retain more mortgages, but the trend of nonbanks dominating origination is expected to continue.

Capital Allocation Strategy: Long-term goal remains 50% Agency, 30% Residential Credit, and 20% MSR, with flexibility to adjust based on market conditions.

Investor Appetite: Despite rising pressures on consumers, the performance of non-QM portfolios remains stable with low delinquency rates.

Hedging Strategy: Increased comfort with swaps as a hedge due to evolving market dynamics, but treasuries remain important for managing volatility. Overall, Annaly Capital Management demonstrated resilience in a challenging market environment, with a strategic focus on diversifying its portfolio and capitalizing on growth opportunities in Residential Credit and MSR. However, geopolitical risks and consumer affordability issues present ongoing challenges.