Annaly Capital Management Inc. · NYSE:NLY
Annaly Capital Management — The JMP Securities Financial Services & Real Estate Conference 2017
28 slides from Annaly Capital Management's conference presentation, Jun 22, 2017
Slide 1: The JMP Securities Financial Services & Real Estate Conference
The JMP Securities Financial Services & Real Estate Conference June 22, 2017
Slide 2: Safe Harbor Notice
Safe Harbor Notice This presentation, other written or oral communications, and our public documents to which we refer contain or incorporate by reference certain forward-looking statements which are based on various assumptions (some of which are beyond our control) and may be identified by referen
Slide 3: Overview
Overview @ANNALY
Slide 4: Annaly Investment Thesis
Annaly Investment Thesis Outperformance, Size, Diversification Strategy Market Operating Diversification, Efficiency, Operating at 65% Lower Leadership Efficiency Ownership and Culture Expense vs. mREIT Peers(1) Total Return of ~81% Since Market Leading 2014, Nearly Twice the Return Dividend
Slide 5: Annaly is a Leading Diversified Capital Manager
Annaly is a Leading Diversified Capital Manager Residential Commercial Real Middle Market Agency Credit Estate (CRE) Lending (MML) $83.8bn Assets(1)|$9.4bn Capital(2) $2.8bn Assets|$1.1bn Capital(2) $2.1bn Assets(1)|$1.0bn Capital(2) $0.8bn Assets|$0.6bn Capital(2) The Annaly Commercial The Annaly M
Slide 6: Annaly's Strategic Evolution
Annaly’s Strategic Evolution Annaly has evolved into a diversified capital manager with various asset classes owned directly on balance sheet, which contribute to long-term growth and stability 1997 Portfolio Diversification 1997 Agency MBS Annaly Capital Management, Inc. (NLY) Prices $102mm IPO 100
Slide 7: Our Views on Annaly's Opportunity and Differentiation
Our Views on Annaly’s Opportunity and Differentiation Market Environment Annaly mREIT Industry Trends Slow Growth/Less Central 1 Broad and Diversified 1 Higher Risk “Monoline” Bank Influence/Benign Platform Strategy Inflation Fed $ Policy: 2 Protecting Book Value 2 Losing Book Value Price = In
Slide 8: Annaly's Dividend Stability Stands Out vs. the mREIT Industry
Annaly’s Dividend Stability Stands Out vs. the mREIT Industry… While Annaly’s dividend has remained stable for more than three years, the average quarterly dividends in each of the Agency, Hybrid and Commercial mREIT sectors have declined meaningfully 110.0% 100.0% Relative Change (8.2%) 90.0% (12.0
Slide 9: …and vs. Other Equity Yield Investments
…and vs. Other Equity Yield Investments In a universe of yield manufacturers, Annaly has maintained superior dividend stability 90% 30.0% 80% 80% 73% 25.0% 70% % of Companies to Cut Dividend 60% 20.0% Dividend Yield 50% 15.0% 40% 38% 34% 10.0% 10.2% 30% 9.6% 30% 8.6% 10.0% 25% 7.5% 22% 21% 20% 4.3%
Slide 10: Efficiency of Annaly's Diversified Operating Model
Efficiency of Annaly’s Diversified Operating Model Annaly broadly outperforms internally and externally managed mREITs From 2012 through Q1 2017, Annaly significantly outperformed its mREIT peers with respect to operating expenditures as a percentage of assets and as a percentage of equity (1) A
Slide 11: Annaly Has Outperformed the S&P and Other Equity Yield Investments
Annaly Has Outperformed the S&P and Other Equity Yield Investments Annaly’s current investment team has outperformed other yield options since 2014 90.0% Annaly 80.7% 80.7% mREITs 55.7% 75.0% Equity REITs 54.7% Banks 46.8% 55.7% 60.0% Utilities 43.7% 54.7% S&P 42.8% 46.8% 45.0% Asset Managers 26.2%
Slide 12: 3 Major Questions Have Been Answered
3 Major Questions Have Been Answered
Slide 13: Increased Visibility of Fed Policy
1 Increased Visibility of Fed Policy Annaly has outperformed as market “paranoia” eases over Fed policy 1.20 35% 30% Indexed Change in Closing Price 1.00 25% Mid Point of Target Rate 20% 0.80 15% 10% 0.60 5% 0% 0.40 -5% 0.20 -10% -15% 0.00 -20% 12/1/2015 3/1/2016 6/1/2016 9/1/2016 12/1/2016 3/1/2017
Slide 14: Unwind of Fed Balance Sheet Presents Growth Opportunity
1 Unwind of Fed Balance Sheet Presents Growth Opportunity We believe a transparent unwind of …is likely to cause market-wide …but funding conditions will drive the Fed’s balance sheet… portfolio rebalancing… private market response Caps limit runoff MBS spreads are expected to widen Attractive
Slide 15: Demonstrated Resiliency – Scaled Diversification Enhances Stability
2 Demonstrated Resiliency – Scaled Diversification Enhances Stability As a result of the diversification strategy, Annaly has delivered consistent dividends and stable book value Dividend Stability(1) Book Value Stability (2) – – (2%) (5%) (4%) (5%) (6%) (7%) (10%) (8%) (7%) (10%) (13%) (15%) (12%)
Slide 16: Shifting Industry Landscape since Announcement of Hatteras Acquisition
3 Shifting Industry Landscape since Announcement of Hatteras Acquisition ~20% fewer mortgage REITs with over ~$14 billion higher industry market capitalization $13,000 $12,000 Since the acquisition of Hatteras, Annaly’s market capitalization has increased by over $3.0bn $11,000 $10,000 During th
Slide 17: Annaly's Outperformance
Annaly’s Outperformance @ANNALY
Slide 18: Annaly vs. Other Yield Sectors – Total Return
Annaly vs. Other Yield Sectors – Total Return On a short-term and long-term basis, Annaly has continued to outperform the mREIT industry as well as the broader market and other yield oriented investment options Total Return Since: Diversification Past 2017 Strategy Two Years YTD (Since 1/1/14) (Sinc
Slide 19: Annaly is a Market Leading Yield Manufacturer
Annaly is a Market Leading Yield Manufacturer Of the top 15 dividend paying financial companies (1), Annaly has generated the highest total return in 2017 YTD Dividends Paid Market Cap ($mm) Total Return Rank IPO Date Company Name 6/19/2017 5 Years 2017 YTD Employees 1 12/10/1962 Wells Fargo $271,05
Slide 20: Annaly Stability and Management Ownership vs. mREIT Industry
Annaly Stability and Management Ownership vs. mREIT Industry In addition to producing superior book value and dividend stability, Annaly’s management team has significantly increased ownership in the Company, tying decisions to performance and shareholder value Agency Hybrid Commercial Book Value De
Slide 21: Annaly's Outperformance Supported by Growth in Institutional Sponsorship
Annaly’s Outperformance Supported by Growth in Institutional Sponsorship Annaly’s institutional shareholder base has increased in size and breadth as the company has continued to outperform as well as engage in a comprehensive marketing campaign Institutional ownership has increased by over 20% wi
Slide 22: Re-Evaluation of Valuation
Re-Evaluation of Valuation @ANNALY
Slide 23: Annaly vs. Other Yield Sectors – Relative Valuation
Annaly vs. Other Yield Sectors – Relative Valuation Annaly’s performance and yield profiles are superior to other yield asset classes, yet valuation still lags the other yield sectors Total Return (1) Yield Price to Book 90% 3.50x 12% 81% 3.16x 75% 3.00x 10% 10% 2.72x 9% 60% 56% 2.50x 47% 44% 43% 8%
Slide 24: Annaly Valuation | Methodology Review
Annaly Valuation | Methodology Review As valuations converge in the mREIT sector, it becomes an opportune time to reexamine valuation methodologies We believe there is a lack of …despite differentiation between … resulting from limited approaches meaningful valuation differentiation to valuing mREIT
Slide 25: Our New Approach to Valuation
Our New Approach to Valuation Reviewing key factors which drive performance when analyzing relative value 15 consecutive quarters of Numerous sources of funding Liquidity and Stability of Book stable dividends declared Low cost of capital given Financing Value & Dividend More stable book val
Slide 26: Relative Value Comparison
Relative Value Comparison Annaly trades at a relative discount to other yield producing sectors despite outperforming across operating and performance metrics Asset Annaly mREITs S&P MLPs Utilities Banks Managers Price to Book 1.11x 1.10x 3.16x 2.07x 2.09x 2.27x 1.32x Valuation Multiples Price to Ea
Slide 27: What Else Makes Annaly Unique
What Else Makes Annaly Unique Leading First Mover in Capital Gender and ~50% of the Firm - Female or Market Leader Markets, Financing Alternatives Ethnic Ethnically Diverse (1) and Industry Strategy Diversity 88% Favorable Rating in Firm Shared Capital Strong Risk Management and Pride and En
Slide 28: Annaly Has Outperformed the S&P and Other Equity Yield Investments
Annaly Has Outperformed the S&P and Other Equity Yield Investments Annaly’s current investment team has outperformed other yield options since 2014 90.0% Annaly 80.7% 80.7% mREITs 55.7% 75.0% Equity REITs 54.7% Banks 46.8% 55.7% 60.0% Utilities 43.7% 54.7% S&P 42.8% 46.8% 45.0% Asset Managers 26.2%