Annaly Capital Management Inc. · NYSE:NLY
Annaly Capital Management — Barclays Global Financial Services Conference 2015
24 slides from Annaly Capital Management's conference presentation, September 2015
Slide 1: Investor Presentation
Investor Presentation September 2015
Slide 2: Annaly Capital Management, Inc.
Annaly Capital Management, Inc. – Market Capitalization: $9.5 Billion Largest mREIT in the Size – Total Assets: $76 Billion World Fixed Floating − Non-Agency Most Diversified: – Agency Strategy – Commercial RE − Commercial RE $2 Trillion − Middle Market Lending Opportunity Historically High Yi
Slide 3: Complementary Investment Strategies
Complementary Investment Strategies The current landscape for Annaly’s investment opportunities is broad, diverse and complementary ($ in trillions) Total Corporate: ~$13.3 trillion $26.6 Trillion of Assets Asset Managers/ Pension/ Other $5.3 Corporate Total Residential Mortgage: Bonds $6.8 ~$9.9 tr
Slide 4: $2 Trillion Opportunity
$2 Trillion Opportunity Annaly is positioned to be a permanent capital solution Fannie / Freddie(1) Federal Reserve(2) CRE Maturities & New Originations(3) $750 $1,800 $450 CRE New $718 $1,735 $1,692 Maturities Originations(4) $700 GSE Run Off(1) $1,700 Fed Run Off $1.5tn $1.7tn $400 $277bn $568bn $
Slide 5: Capital Allocation Profile
Capital Allocation Profile > 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 Stable Fairly Stable Benefits BV Impact Higher Low to Moderate Low FHLB Highly Liquid Repo Markets
Slide 6: Annaly vs. the mREIT Sector
Annaly vs. the mREIT Sector Annaly operates the largest, most liquid mREIT in the industry Agency Hybrid Commercial Peers Peers Peers Average $9.5 $2.0 $1.4 $1.9 Market Cap ($bn) Yield 11.9% 13.7% 14.1% 8.8% Price / Book 0.82x 0.77x 0.85x 1.03x Leverage (Q2'15) 5.9x 8.0x 4.2x 2.1x ADTV ($mm) $106.4
Slide 7: Annaly vs. Other Yield Investments
Annaly vs. Other Yield Investments Annaly pays a superior dividend yield compared to other income-oriented sectors Asset Utilities Equity REITs MLPs Banks Managers Average $9.5 $9.3 $4.9 $5.7 $9.6 $50.3 Market Cap ($bn) Yield 11.9% 4.3% 4.2% 7.2% 7.1% 2.1% Price / Book 0.82x 1.93x 2.34x 1.76x 3.86x
Slide 8: Annaly Has Demonstrated Stability in Core Earnings Over Time…
Annaly Has Demonstrated Stability in Core Earnings Over Time… Annaly produced core earnings ranging from $0.25 to $0.35 in 10 of the 12 quarters since QE3 – a range that is much less volatile than average for most other yield oriented asset classes QE3 Q1 2015 300% 3.5% 468% 3.0% 2.5% 200% Volatilit
Slide 9: …While Delivering Premium Yield
…While Delivering Premium Yield Annaly’s current yield far outstrips income-oriented market alternatives Current Yields 14.0% 11.9% 12.0% 10.0% 8.0% 7.6% 7.2% 7.1% 6.0% 4.3% 4.2% 4.0% 3.5% 3.3% 2.6% 2.2% 2.2% 2.1% 2.0% 0.0% Current Yield NLY HY MLPs Asset Managers Utilities Equity REITs IG Munis CMB
Slide 10: Industry Performance Analysis: 5-Year Dividends Paid
Industry Performance Analysis: 5-Year Dividends Paid Dividends Paid ($ millions) Total Return Company Name Market Cap LTM 3 Years 5 Years 2014 Wells Fargo $261,750 $8,572 $22,141 $29,190 24% JPMorgan 227,248 7,364 19,481 26,610 10% Bank of America 162,631 4,834 8,158 11,734 16% Annaly Capital Manage
Slide 11: Top Insider Purchases
Top Insider Purchases Top Annaly Management Purchases Since 2011 Shares Purchase Purchase Filing Date Holder Purchased(1) Price ($)(1) Value ($) 8/7/2015 Kevin G. Keyes-President; Director 300,000 $10.08 $3,024,000 8/20/2013 Wellington J. Denahan-Chairman of Board & CEO 181,818 $10.96 $1,993,631 5/8
Slide 12: The Annaly Track Record
The Annaly Track Record Annaly has paid out $13.0 billion in dividends since inception (1) Price Total Dividends 700% Appreciation Return Annaly (20%) 553% 533% 600% S&P 500 106% 81% 187% Bloomberg mREIT Index (82%) 190% 108% 500% MSCI US REIT Index 26% 68% 93% Berkshire Hathaway 346% 0% 346% S&P Fi
Slide 13: Annaly Investors Have Been Rewarded Over the Long Term
Annaly Investors Have Been Rewarded Over the Long Term Annaly has generated a total return of over 800% since the last time the stock traded at such a steep discount to Book Value (December 1998) 2.00x 1000% 1.80x 1.60x 800% 1.40x Price to Book Ratio Total Return 600% Average: 1.15x 1.20x 1.00x 400%
Slide 14: Agency
Agency 13 13
Slide 15: Annaly Evolution
Annaly Evolution 1998 2004 / 2005 2015 Key Takeaways Market Largest mREIT $104mm $1.4bn $9.5bn Cap(1) globally Agency MBS More durable Asset Resi Credit Agency MBS Agency MBS earnings and book Classes CRE Debt & Equity value Corporate Debt 75% Spec Pools Agency strategy has Agency 30% Fixed 30
Slide 16: 2014 – 2015 Agency Strategic Roadmap
2014 – 2015 Agency Strategic Roadmap Annaly actively manages the portfolio with a long-term perspective to provide an attractive risk-adjusted, stable return to shareholders Q2’14: Swap Unwinds Q3/Q4: Repositioning Q1-15: Dollar Roll Shift to shorter duration, Monetized Specified Decision to i
Slide 17: Residential Credit Portfolio
Residential Credit Portfolio Resi Credit Investment Overview Low correlation profile to Agency book Portfolio Composition (Holdings) (1) Spread attractive relative to alternative 2% credit products 3% 2% Diversification Helps better manage interest rate cycles CRT Given the combination of floa
Slide 18: Comparative Performance
Comparative Performance Annaly has generated an economic return of 16.4% over the last 6 quarter vs. 11.0% 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% 1.0% 1.0% 0.7% 0.8% 0.6% 0.5% 0.4% 0.2% 0.1% 0.0% 0.0% (0.1%) (
Slide 19: Economic Return in Stressed or Volatile Markets
Economic Return in Stressed or Volatile Markets Annaly has consistently outperformed during times of volatility; aggregate returns over the period of 25.7% vs. (15.3%) for the S&P 500 (1) Economic Return NLY Agency Peers S&P 500 29.7% 30.0% 21.2% 20.0% 2.8% 9.4% 10.0% 6.0% 12.6% (0.2%) – (30.5%) (2.
Slide 20: Conservative Book Value Forecasting
Conservative Book Value Forecasting Due to active portfolio management, Annaly has consistently outperformed model projections of book value impact based on realized movements in interest rates and mortgage spreads 10.0% 3.0% 8.0% 2.5% 6.0% 4.0% 2.0% UST Yield 2.0% 1.5% – (2.0%) 1.0% (4.0%) (6.0%) Q
Slide 21: Commercial
Commercial 20 20
Slide 22: CRE: Large Investable Market—Room for Growth
CRE: Large Investable Market—Room for Growth Continued growth for investing opportunities in the U.S. Current Net Stock of Private CRE Assets (1) CRE Transaction Volume (2) ($ in billions) ($ in billions) Other, $528 Total: $430.4 Warehouse, $426 $6.9 trillion $362.5 Apartment, $2,150 $298.1 $258.2
Slide 23: Annaly Commercial Real Estate Group Portfolio
Annaly Commercial Real Estate Group Portfolio ACREG invests across the capital structure Whole Loans Mezzanine Loans Preferred Equity Equity Securities (AAA CMBS, B-Pieces) ACREG uses leverage to enhance returns of whole loans, equity and AAA CMBS Asset Value Equity Invested Annaly Boo
Slide 24: Annaly Commercial Real Estate Group Strategy
Annaly Commercial Real Estate Group Strategy Intensive credit focus as long-term investors, not traders Debt Approach – Broad Based Providing capital for acquisitions and refinancings at higher leverage points in the capital structure on real estate with growth potential Focus on top tier sponso
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