Annaly(US:NLY)2026-01-29 15:02Financial Data and Key Metrics Changes - The company's book value per share increased by 5% from $19.25 in the prior quarter to $20.21 as of December 31, 2025 [23] - Earnings Available for Distribution (EAD) rose by $0.01 to $0.74, exceeding the dividend for the quarter [24] - Economic return for Q4 was 8.6%, bringing the full-year economic return to 20.2% [23][24] - Economic leverage decreased to 5.6 turns, down from the previous quarter [8][25] Business Line Data and Key Metrics Changes - The agency portfolio ended 2025 at $93 billion, an increase of nearly $6 billion quarter-over-quarter and $22 billion year-over-year, representing 62% of the firm's capital [9] - The residential credit portfolio reached $8 billion, up $1.1 billion quarter-over-quarter, representing approximately 19% of the firm's capital [13] - The mortgage servicing rights (MSR) portfolio ended at $3.8 billion, a $280 million increase quarter-over-quarter and a 15% increase year-over-year [17] Market Data and Key Metrics Changes - Fixed income markets showed strong performance, with the U.S. aggregate bond index registering the highest total return since 2020 [7] - The yield curve steepened during the quarter as short-term yields fell while long-term yields rose modestly [7] - The agency market experienced significant spread tightening following GSE's MBS purchase announcements [20] Company Strategy and Development Direction - The company aims to increase capital allocation to residential credit and MSR, targeting a long-term equity allocation of 50% Agency MBS, 30% RESI, and 20% MSR [78][79] - The diversified housing finance model is expected to continue performing well for shareholders, with a focus on maintaining market leadership across various strategies [21][22] Management's Comments on Operating Environment and Future Outlook - The macroeconomic environment remains solid, with the labor market showing signs of softness but limited layoffs [5][6] - Management expressed confidence in the durability of the swaps market as a hedge and the overall stability of the agency market [31][32] - The company anticipates continued growth in the non-agency market and is well-positioned to benefit from increased liquidity in the non-QM market [20][21] Other Important Information - The company raised $560 million of common equity in Q4, bringing total equity raised in 2025 to $2.9 billion [9] - The efficiency ratio improved to 1.31% for Q4, with a full-year ratio of 1.42% [27] Q&A Session Summary Question: Update on mark-to-market book values - Management reported a 4% increase in book value, inclusive of dividend accrual [30] Question: Portfolio returns and comfort level with dividend in 2026 - Management expressed confidence in achieving mid-teens returns and stated the dividend is safe [31][32] Question: Insights on MSR portfolio and current coupon MSR - Management discussed the infrastructure set up for active participation in the MSR market and the potential for increased origination [36][40] Question: Impact of G-fee cuts on prepayment environment - Management indicated that a G-fee cut on purchase loans could be beneficial, but broad cuts might negatively impact the MBS market [46] Question: Risks that could change the low-risk environment - Management identified global fiscal risks and asset market euphoria as potential concerns [60][61] Question: Attractiveness of buying lower-coupon MBS - Management noted that valuations on low-coupon MBS are tight, and better ways to manage risk exist [68] Question: Likelihood of GSE portfolio caps being increased - Management stated uncertainty regarding the increase of caps but noted the GSEs have significant capacity [84]