Annaly Capital Management Inc. · NYSE:NLY
Annaly Capital Management — Investor Presentation (February 2016)
27 slides from Annaly Capital Management's investor presentation, February 2016
Slide 1: Investor Presentation February 2016
Investor Presentation February 2016
Slide 2: Safe Harbor
Safe Harbor This Presentation contains statements that, to the extent they are not recitations of historical fact, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). All such forward-looking statements are intended t
Slide 3: Introduction & Macro Overview
Introduction & Macro Overview 2 2
Slide 4: Annaly Capital Management, Inc.
Annaly Capital Management, Inc. – Market Capitalization: $9 Billion Largest mREIT in the Size – Total Assets: $75 Billion World Fixed Floating − Non-Agency Most Diversified: – Agency Strategy – Commercial RE − Commercial RE $2 Trillion − Middle Market Lending Opportunity Historically High Yiel
Slide 5: We Are Not Surprised by the Increased Volatility in the Global Markets
We Are Not Surprised by the Increased Volatility in the Global Markets We anticipated slowing global growth, divergent monetary policies, impact of regulation and increased market volatility “…following three purchase programs that have brought the Fed’s balance sheet to $4.5 trillion, there are num
Slide 6: Slowing Global Growth
Slowing Global Growth World Growth Forecasts (GDP) Source: DoubleLine, Bianco Research. 5 Note: Gross Domestic Product (GDP) is the monetary value for all the finished goods and services produced within a given country. 5
Slide 7: Earnings Recession
Earnings “Recession” With earnings growth negative for the first time since the crisis, valuations remain near decade highs 80% 40.0x 35.0x 60% 30.0x 40% 25.0x EPS Growth P/E Ratio 20% 20.0x 15.0x 0% 10.0x (20%) 5.0x (40%) 0.0x EPS Growth Price Earnings Ratio Source: Bloomberg. Market data represent
Slide 8: China/EM Slowdown, Debt Burdens & Currency Devaluations
China/EM Slowdown, Debt Burdens & Currency Devaluations EM Currency Collapse 140 6,000 120 5,000 100 4,000 Currency vs USD Index Price 80 3,000 60 2,000 40 1,000 20 0 1/2/2008 1/2/2009 1/2/2010 1/2/2011 1/2/2012 1/2/2013 1/2/2014 1/2/2015 1/2/2016 Russian Ruble South African Rand Indian Rupee Brazil
Slide 9: Oil and Commodity Collapse Signal Weakening Global Demand
Oil and Commodity Collapse Signal Weakening Global Demand Commodity Prices (January 9, 1996 to January 11, 2016) Source: Bloomberg. 8 Note: BCOM Commodity Index is calculated on an excess return basis and reflects commodity futures price movements with monthly rebalancing. You cannot invest directly
Slide 10: Global Monetary Policy Impacting Global Yields
Global Monetary Policy Impacting Global Yields 10 Year Sovereign Yields 8% 7% 6% 5% 4% Yield 3% 2% 1% -- (1%) 1/25/2006 1/25/2007 1/25/2008 1/25/2009 1/25/2010 1/25/2011 1/25/2012 1/25/2013 1/25/2014 1/25/2015 US UK Germany France Italy Spain Switzerland Japan Source: Bloomberg. Market data as of Ja
Slide 11: Interest Rate Volatility Driven by Global Monetary Policy
Interest Rate Volatility Driven by Global Monetary Policy Divergence between domestic and global central banks is unlikely to allow the Fed achieve its target January 2016 saw medium and long-dated Treasury yields reverse 2015 Q4 increases Broad underperformance of risk assets amid oil supply gl
Slide 12: Annaly's Positioning
~ ANNALY’ | Annaly’s Positioning 11
Slide 13: $2 Trillion Opportunity
$2 Trillion Opportunity Annaly is positioned as a permanent capital solution for the redistribution of MBS, resi-credit and commercial real estate assets Fannie / Freddie(1) Federal Reserve(2) CRE Maturities & New Originations(3) $750 $1,800 $450 CRE New $718 $1,744 $1,744 Fed Run Off Maturities Ori
Slide 14: Annaly's Evolution
Annaly’s Evolution Annaly’s diversified platform is now built to manage various rate environments 1998 2004 / 2005 2015 Key Takeaways Market Largest mREIT $104mm $1.4bn $9.4bn Cap(1) globally Agency MBS More durable Asset Resi Credit Agency MBS Agency MBS earnings and book Classes CRE Debt & Equ
Slide 15: Annaly Poised for Future Fed Policy
Annaly Poised for Future Fed Policy Lower interest rate sensitivity due to diversification Absolute Tightening Benign Relative to 2004 - 2006 Portfolio Better Positioned for Rate Hike Markets price flat curve at low levels similar to the 2004- Significant diversification of portfolio composition
Slide 16: Capital Allocation Profile
Capital Allocation Profile Balancing the liquidity of the Agency strategies with the durability of complementary credit strategies > 75% of Capital Up to 25% of Capital Agency/Residential Commercial Middle Mkt Lending Liquidity Very Strong Low to Moderate Moderate Income Stability Fluctuates Fairly
Slide 17: Annaly's Diversification Expands Investment Breadth
Annaly’s Diversification Expands Investment Breadth Annaly has conservatively expanded credit platforms while avoiding operationally intense businesses with significant overhead Market Cap Agency Non- Resi Whole MSR / CRE CRE Corporate ($mm) MBS Agency Loans Servicing Debt Equity Credit Annaly Capit
Slide 18: Significant Funding Advantage
Significant Funding Advantage Annaly continues to have a variety of potential funding sources for each asset class in which the Company invests Agency Resi Credit CRE MML Securitization Potential Repo Warehouse Lines Repo Credit Facilities Financing Rcap Securities 1st Mortgages FHLB
Slide 19: Efficiency of Operating Model
Efficiency of Operating Model Annaly Outperforms Internally and Externally Managed mREITs Since 2012, Annaly has significantly outperformed mREIT peers with respect to operating expenditures as a percentage of assets and as a percentage of equity Annaly’s average expense levels over the period a
Slide 20: Industry Landscape & Performance
Industry Landscape & Performance 19 19
Slide 21: Mortgage REIT Industry Landscape
Mortgage REIT Industry Landscape Annaly’s market cap is larger than that of the smallest 26 mREITs in aggregate $10,000 $9,000 Total Market Cap: $50.4bn $8,000 $7,000 Market Cap Range # of Companies % of Total Market Cap Greater than $4bn 3 38.6% Market Cap ($mm) $6,000 $2 - $4bn 6 29.0% $5,000 $1 -
Slide 22: Annaly Business Units Among Mortgage REIT Industry Landscape
Annaly Business Units Among Mortgage REIT Industry Landscape As Annaly has continued its diversification effort across asset classes, the credit focused business lines are now of meaningful size in the mREIT industry $8 #1 Annaly Market Cap Rank Dedicated Capital Agency 1 $9.4bn $6 Commercial 10 $2.
Slide 23: Annaly vs. Other Yield Investments
Annaly vs. Other Yield Investments Despite recent volatility, Annaly has outperformed peers, as well as other yield focused investments 40% 30% 27% 21% 20% 20% 10% 10% 2% Total Return – (4%) (10%) (20%) (30%) (31%) (36%) (40%) (50%) Annaly mREIT Index Utilities Equity REITs MLPs Asset Managers Banks
Slide 24: Stability of Return – Market Sharpe Ratios
NLY Stability of Return – Market Sharpe Ratios Over the past two years, Annaly’s shareholders have earned a more attractive risk-adjusted return than the mortgage REIT universe and numerous other yield sectors 3.50x Asset Managers 3.00x Equity REITs 2.50x P/B Valuation 2.00x Utilities 1.50x MLPs Com
Slide 25: Comparative Performance
Comparative Performance Annaly has generated an economic return of 16.2% between Q1 2014 and Q3 2015 vs. 14.0% for its Agency peers while operating at 70% of the average peer leverage Economic Return per Unit of Leverage 2.5% 2.0% 1.9% 1.5% 1.2% 1.0% 0.8% 0.7% 0.7% 0.5% 0.4% 0.2% 0.0% 0.1% 0.0% 0.0%
Slide 26: Annaly vs. the VIX
Annaly vs. the VIX During periods of heightened volatility Annaly has outperformed industry peers 30.0% 60 25.0% 50 20.0% 40 15.0% Total Return VIX Index 30 10.0% 20 5.0% 10 – (5.0%) 0 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 VIX Annaly mREIT Index Source: Bloomberg. Weekly data from December 31, 2013 unt
Slide 27: The Annaly Track Record
The Annaly Track Record Annaly has paid out $13.7 billion in dividends since inception (1) 700% Price Total Dividends Appreciation Return Annaly (25%) 554% 528% 600% Berkshire Hathaway 323% 0% 323% S&P 500 101% 81% 182% 500% MSCI US REIT Index 29% 73% 102% Bloomberg mREIT Index (84%) 171% 86% S&P Fi
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