NLY - Earnings call transcript Q4 2019 | Annaly Capital Management, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning and welcome to the Fourth Quarter 2019 Annaly Capital Management Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Purvi Kamdar, Head of Investor Relations. ahead. go Please

Purvi Kamdar

risks morning recent earnings Good forward-looking to fourth section to the made in are Thank Risk and the for and quarterly Annaly XXXX Factors certain subject are call today’s our Any uncertainties, Capital quarter which during outlined most you. and call welcome and annual Management, statements filings. Inc. SEC

release, you materially in to and results or forward-looking these events in quarterly from our to may disclaimer addition differ earnings the our annual read We Actual forward-looking statements encourage statements. filings.

conference content of date may the undertake that information. obligation Additionally, information do or is We only this and the call of update contain any disclaim this to as time-sensitive specifically not accurate revise hereof.

and GAAP earnings reconciliation measures. During this non-GAAP call, financial to in our measures we of is release. included GAAP A may non-GAAP both present

investor for As on fourth today’s can a of be investors found referenced the our XXXX Presentations found the section under Company’s XXXX and post Annaly our in routinely www.annaly.com. Content financial supplement, call presentations website. reminder, in both fourth quarter information website quarter

information and its other Annaly releases, and SEC press Annaly interested website. our update to similar on encourages conference the under web Company’s Company’s parties presentations, analysts, addition a FD basis. the obligations webcasts as to post of disclosing a use following and material other from website filings, complying non-public disclosure investors, intends posts Annaly Regulation to media and with to investor means presentations information an in for time-to-time page monitor regular the calls, materials it public on

and David Serena Interim morning’s is on Finkelstein, Chief Chief event Financial Participants Executive and Wolfe, this members Officer Chief this note Officer; other call of include Please recorded. Investment Glenn Votek, President; management. Officer being

with I’ll Glenn. over turn the that, to And call

Glenn Votek

for I'm everyone. morning good and outlook our performance, internalization cover and our to going year Purvi, you, ahead. the our recent briefly announcement, Thank

who Serena a joined and who to want later Before you'll take the us I from CFO, be I get December to new call. opportunity hearing Wolfe, introduce into that, the in on

our to have thrilled team. Serena We are on

veteran, a estate first a respected thanks our her matters made of and she's forward. financial us from months immediate joined deep her during EY with real from holding and going and both leadership career already Annaly, leadership she positions, We'll had She's to impact variety few industry meaningful financial certainly expertise who where experience. acumen in and distinguished benefit

So, excited have her really we're here. to

Turning a year. shareholders to for our that our strong the results, we with in pleased we're delivered extremely finish

I to During keep the greater quarter, that want we we'll David Serena highlight, and it milestones brief and as detail. achieved of both provide a number will

the for had Our economic year performance XX.X% since for was we've the return to XXXX. X.X% best and quarter the that

had capital credit to in shareholder of investments and continuation And of of third efforts saw aspects momentum a quarter, the And our focus these quarterly the continue the quarter increasing allocation value. was each achievements quarter we all business an to we the earnings fourth as we that marked anticipated, and activity positive expect us XXXX. into Credit for enhancing draw during the our on across to in accelerated XX%.

purpose-driven benefits diversification There's leadership. the strategy focus and responsibility we've industry seen a efficiencies performance. the key this that our continuing on governance, by across and investors of our and diversity We corporate have operating as did returns enhance governance acknowledge increasingly advancing shift to improving financial and

growth, purchases total billion yearly as doubling of had deals nearly the standpoint, in both XXXX, result increase in We originated XX% $X.X year, new with credit market a credit closed we of $X.X and XX% of middle investment a home residential its during assets lending businesses. across representing an commercial From billion. debt that

leadership and optimize to long-term. order activity Our we continue over on drive piece assets to reform, management, XXXX, billion GSE us capital $X In to opportunity a for second under the lending bottom-line. thought significant for exceeding led in the our remains we in which our market middle investment also disciplined co-authored efficiencies

to and redeemed capital through markets opportunistically expensive access creative a we transactions. Notably, of series more preferred

our securitization of markets commercial credit well businesses. an be we the for to sources strategy is financing. generation an compliment and by non-recourse efficient Additionally, both funding accessing resi effective asset diversified for proven It estate our as real source as attractive

focus responsibility either marked Finally, the racially of We increase to respect or employees and all governance, corporate over where an considerable half area new XXXX XX% year has more some and strides workforce diversity as identifying female with hires a of significant the been for which than of of us. diverse.

to our only Bloomberg as we third one which the year year, that has a commitment Annaly Gender-Equality and this that. of Index member mortgage New recognition selected of recognized, we're the were been two of of very represents diversity, REITs proud consecutive

we Chair points in separated a side, fee reduce independent governance series of shareholder XX to qualified Chair independent basis appointed of CEO made highly new elected capital, first directors. roles the the Board. incremental promote our On two their management and value. changes We ever the that We and

framework All our interests all our long-term stakeholders, employees our important served and of partners. benefits provide these including to shareholders action our business our high are and to a that strong governance standards the

a dedicated commitment managed and acquire manager and a This to as the to further exemplifies and manager We fact fleet. our given exclusively of progression shareholders the also to transition Annaly announced our yesterday our for internally an is as client. scaling natural groups, our the investment full to following that our external plans transactions

strategic and Annaly's corporate internalization forward practices to creates another step The represents efforts flexibility. in our both and operational enhance governance

increased incentives around with aligns shareholders, and disclosure management and Specifically, the compensation its transparency corporate practices. improved between internalization

anticipate operating over scale cost do efficiency, given already the we drive expect profile savings improvements not favorable Additionally, do to while long-term. and immediate our we cost both relative in

fundamentals shareholders. and for to our continues we now as data been muted, our recent show outlook, cycle for solid refreshing within appear value to enter are largely more encouraged expected businesses therefore and use are deliver rates to historical The prospects concerns to conditions Turning as extended, the has our we economic continue Consensus into ranges. remain by very economic that to our ability XXXX. for constructed

re-pricing that recent which expect things remain years. reinforced market year, the we for we historically is risks, in we're that during The And our been we while exogenous should volatility focused can the prepared election during the case view the control. on equally is

focusing the economies product access shape, Our operational role and capital GSE expanded direct with by to management. take that's on greater prudent and of provided as a continues reform to driving flexibility, as optionality scale risk

in will on also today update Transparency my plans. search. on Finally, provide spirit, CEO I been that and a that future provide I clarity so want has theme our an we've to noted

member external involved the a of highly the of candidates. of board, to evaluation individuals few internal we into As the and lead I'm future. the that confident next the intimately will the I'm of identified months, And the both CEO Company have over right CEO course committee search the in

As guide forward. I me, firm for to the interim transition the through stepped at of into right and board of role to CEO help this request the going leader the the find

I my looking stage of the next However, on to to life. haven't move

role discussed to transition following and with So, plan CEO. the from operational team, a I permanent as full-time away the a board both employment of management the I

going continuity that, I'll board. period analyst for advisory forward an And ensure in to capacity the provide remain to continue support member tend help to as development after of interim to and a I a transition. seamless

the have the with the deeply firm the selected the respect meantime, transitioned. has So I forward rest new until the support And and management Company utmost committed permanent which fellow the to in members. for, remain been I partnership in complete, board my the of I to continue look and team, CEO once leading to CEO,

it to David. And with that, I'll turn over

David Finkelstein

yield volatility, curve, a positive much normalized, retracement characterized the sentiment Fed Glenn. leading and MBS credit year executed its the the quarters the funding rate three you, firm cut sheet Both a reduce as Thank and interest of return of and fourth of third brought XXXX. The quarter of to that balance spreads, resumed rate risk growth. markets of about widening steeper agency first the

our modestly total leverage as nearly result agency in in by X each and As shifted to of growth our times. businesses Glenn of half to of economic environment, of X.X higher turn return declined capital reduced roughly credit a while We a our exposure allocation overall combination X% we over period. a credit to XX% discussed, this generated the

summarize prepayment financing significant in improvement markets. Before I briefly want Federal businesses. discussing our agency, MBS portfolio to perhaps about across by notably, environment a funding market activity intervention with reduction most our the from environment, leading the improved investment a concerns; and in Beginning Reserve four outlook, benefited brought to in

negative agency positions, reduction carry to primarily attributable Our was and TBA short given higher coupons. portfolio

markets meaningfully widened modest further and of term unchanged took and swap into greater two to XX% OIS extend Our portfolio hedge on further average average over We spreads as a ratio roughly SOFR-linked we the and at our the stability remain repo financing XXXX. and extended rotation advantage term months, swaps, into quarter. on our with

we X.X capitalizing the portfolios. DUS assets, bonds, had as near for price in of on bank while very to additional retaining portion Shifting agency a credits, dollar Of the Glenn mentioned, demand par residential sector. re-securitized securities and of premium we billion note, priced DUS bonds quarter the distributed IO active strong by

period. Our million we eligible over agency portfolio and the investor grew XXX whole over billion, prime as expanded of to X.X acquired loans

the assets in January, private XXX modest remains level generated execution of October, executed loans. our return we of issued an the OBX XXth expected held million Securitization balance leverage. of expanded with securities sheet strong investment the in by these residual and shelf in recently, of of securitization more Each XXX on million and backed transactions low-teens we

to fundamentals, low these by gain issues below supported OBX underlying programs prepayment to such have shelf the the helped Our and investor average establish and speeds; been delinquency efforts as programmatic broad characteristics interest. rates have through sound

real originations assets well commercial both predominantly exposure which asset purchases by estate, in single whole driven the to borrower billion sector. loan securities to turning as was single Now X.X grew our as

decreased Our well cost LIBOR additional roughly weighted added lower portfolio by cost borrowing for cuts of XX driven Fed both to basis the the use quarter. X.X%, as reduction in financing to securities average of during given as repo by points

the of is capital return reduce more and rate XX.X% This consequently in offset the CRE levered yields than quarter. floating investment our increased portfolio roughly costs on

lending quarter Our originations the the on slightly portfolio grew new year X exceeding middle billion. for for market

the well begin over portfolio completion MML the on the loan of first closed are very to remains and of position, $XXX our process in commitments $XXX focus in composition new February, at XX% has which year, we anticipated business started weighting remains million with million a industries, syndicating in noncyclical including and portfolio profitably this leverage early the a with that half Our lien XXXX X.X near-term. defensive roughly over times. we very of for low attractive off

XXXX to in the while rates. of had far economy, Now so a transitory in leading the meaningfully ultimately the to negative volatility have growth coronavirus financial impact to and be U.S. shifting the which on outlook, continues anticipate impact markets, by to our but characterized low stable global events reintroducing have lower inflation. We

positive The investment a a as an lead partial forward. revolution much as investment that factor consumer meanwhile, recent disputes improvement in are as trade market that residential XXXX business strong, months. going should the remains and marked And the in has impact seen of labor fundamentals uptick healthy to

reduced term considerable Although, going continue second actions will expect financing and markets, purchases to we paying quarter, in plus be operations stability the a most attention overnight market repo aggressive repo forward. in to monthly the Fed's $XX support policymakers bill billion in

illiquidity and to anticipate relative to stable portfolio to MBS, face investors supporting technical such, strong more remain help the net to combined sector agency in changes as value MBS. reserve constructive financing markets versus supply sectors federal We that nonetheless in conditions As will should on efficiently. issuance agency agency provide a ample with regulatory available will absorb repo Fed help continue banks other runoff. the headwind to keep and be make repo we This financing

strong cautious given incremental fundamentals to With in XXXX, the housing on we dues the demand our levels residential rate growth sector. drive credit, respect and sound to current the sector expect remain on our and for in business overall, but

growth. Moreover, balance reform for and moderate additional further quality capital ensure private an out will opportunities to our to administration's efforts horizon, Nonetheless, credit bring high the Glenn discussed. market more the continue credit appropriate on we businesses middle lending across assets businesses. as may may underwrite Commercial GSE experience

the breadth direct businesses will increased of benefit of in benefits the credit execution And of finally, warehouse from our should in as financing our continue further returns. cost our each improves lending lower leading capital, solid sector platform to firms financings securitization residential to across the

it discuss hand the Serena will I financials. over that, with to And to

Serena Wolfe

I'm Annaly everyone. can in settling morning good months a two honestly joining and the has in my fun. talented of pleased over David, to tell A and December. in, working first you, professionals join and a after this of Thank such it quite for little quite Company call, earnings been pleasure as you CFO really you, today team good with a I

highlights brief will on and financial matrix year XXXX. And results earnings as I I PAA. primarily our will a core be the for really and provide morning this related quarter while support results, non-GAAP core focusing GAAP or excluding our full

year As Glenn ending trough of the of share loss was core four the a earlier, gap earnings quarter generated $X.XX. in the full the $X We year per year, for commented excluding QX year for QX strong. $X.XX performance a PAA with and for

interest $XX.X increases the and balances, average lower were largest to role contributors due more the to million rates on improved $XX.X in income and cover dollar for moment. expense The to of interest in and for a million expense low I'll quarter repo the QX earnings

of XXX X.XX%, basis from X.XX% X% of that The points, is portfolio generated to basis up NIM, QX mostly points QX. costs interest of lower XXX average in by driven

the benefited close which liquidity concerns the from eased Our as injection, Fed's year. core we funding out earnings

XX%, increased days. decreased and million XX expense million XXX XX versus repo rates average days repo versus XXX Our weighted XX%,

what clearly for of comments, on We resi Now programmatic of briefly our to issuer as I gained our the David a credit credit efficiencies ourselves securitization in touch funding but is growth our his particular business. our continued in credit with we've operations covered the had resi businesses business. established in the wanted

activity. of Annaly issuer being billion origination X.X loans year new With an having executed aggregate securitization, top five in of increase non-bank a on XXXX, of XX% prior

particularly prove through team we has financing costs, six efficiencies the volume, can will resi increased financing our months in which beneficial [speed] expected future. loan as in market This in with to Our FHLB the meaningful purchase. is credit from on securitize cost reduction driven low- average

quality achieved those our We've and this presenting underlying fundamentals, outlook investments growth the our credit on the of while assets.

origination our day has our our basis new XX.X portfolio outperformed Our residential by pool points. illustrated which purchases discipline XX portfolio, This portfolio, our plus loan underwriting. is delinquencies and excluding has of rights initial whole

MML quarter's of CECL Additionally, we evident to between and total of included businesses reserves since which for recorded businesses be million will immaterial. cumulative direct ACREG The and provisions inception. approximately expect portfolio XX quality be that now our also that lending is time our we next down

finance As ensuring a continue have our credit to we diverse grow we businesses, of and robust maintained disciplined approach available financing, sources funding. to

XXX During the we increasing continued credit additional and businesses facility expand to for by funding put our have our capacity financing sources, an past our million. commercial place year, in

with we addition, million. deal CLO first of In a max executed our capacity XXX CRE

capital Series equity the XX by efforts base. our XXX We capital shares continue preferred outstanding optimize Series on our all raised to points. of execute stock, of of We million preferred to opportunistically reducing preferred cost H redeemed and C and basis

to third total plan swiftly market by million XXX the of repurchasing in our quarters, and proceeds the buyback approved us in share Directors allowed shares Board the of act year. representing previously fourth Our for

year-over-year metrics across efficiency Our and consistent other company. are board and the and the among remain cross-section comparable peers best

fact, efficient expense and internalization discussed than times In equity internally completion our REIT following more mortgage earlier. is managed operating over ratio the of to X.X

X.X% of range achieve long-term to to expect We a X.XX%.

processes and Importantly, and metrics increase platform. to headcount while our best-in-class in our XX investment technology. we invest we our by sustaining our in achieved these continue XXXX, people, In technology people

financial further data digital analytics our continued transformation, controls. automation use and we data operational to enhance improve our year, and and of the utilizing our During

internalization to has are investment while and and of manager years, us in of future As and solid our evolve to result, efficiencies drive the benefits technology Directors. insights foundation we in to the business future, reap management of our people in provided as well the better providing the positioned a to the enable Board

we'll to operator open the it so that, And I'll over and questions. turn for with

Operator

begin We question-and-answer question from first Shane Rick comes of the Morgan. Instructions] [Operator will The now JP session.

Rick Shane

the as the in quarter do business? in business. that see opportunity anticipated? seeing And we the XXXX, the in first you or sort deploy to capital opportunities of given to Are good margin and curious, agency move of you into that into Just sort improvement move continue through you

David Finkelstein

David. is This

did lot amount end A, into MBS, be did XXXX, So going going they so a We we spread fair of there's and the contraction rally. heading December, a tighter. supply experience spring, agency a into into Heading relatively experienced obviously the heavy. of to that in year prepayments are we sharp think

a portfolio, reduced year Thus of quarter the the far also does anticipation So does deployed we've reduction little the bit of supplied late in to when last experienced the we portfolio ability calm. some be into spring in the more. this and that explain capital

anticipating bring So into up we better in are look opportunity perfectly right the spreads quarter but back second the reasonable, perhaps now, actually a to that environment. leverage

Rick Shane

second then And question.

commercial real follow. commercial commercial many a portfolio, we On REITs are focused than that of retail overtime contrarian concentrated you'd Is to estate you in is with take something a view? down? that of bit mortgage more little mortgage, the sort guys the that like that

Glenn Votek

I'll is of over I'll say it retail Mike. the hand vast to necessity majority based. and start exposure our I'd then

And in represented to think sector as be what stability contrarian so, we so broadly the a retail. more than not by much view retail what it's is

Mike Haylon

is Yes, Rick. is centers. I think anchored shopping in Mike. This grocery Yes, the majority

we had owning long-term. the to continue reap or in exposure we've own of years the benefits to X and X think expect for I now. And that so to assets those

Operator

Please from ahead. of Hagen KBW. Eric comes question next The go

Eric Hagen

ratio? on exactly positive let to hurdle lower you in more In your flexibility. mean the of a last Or easier cost sorry, that it fundamentally internalizing it change rate reaching as ROE accomplish mean guys just you're you operating provide expand should in noted release result Does means. to could night, that guys the with does what on want be type businesses expense that that I press operating -- greater change a structure?

Glenn Votek

Yes, made has significant her investments I both Serena it's combination in in would pointed those say, out of Like we've a things. opening remarks, technology. of

think us want efficiencies will comfortable while to-date continue we how operational that strategically think do we're taken approach in we've very and I to to improvements. the to allow I that we'll assets continue of But source that. with terms to That'll continue. drive

strategic opportunity other expanded allow does opportunities. elaborate David, to look at that? it if want an on us However, to you And,

David Finkelstein

Yes, the just point. Glenn's add to

with feel potentially should of do the perfectly class. flexibility simply This like that. the businesses, more but our either we capable to So, opportunity growth, be acquire pursue into to flexibility an additional asset just gives we're assets out enter or horizon just organic having capabilities an to our expand there us

Eric Hagen

Thanks for you seems in the like a segment. guys under It little that are maybe detail. credit levered

structural So next think I'm and running credit about just in curious leverage segment that exposure how possibly to the financing have trade-off the currently a the recourse little you more have? leverage in the of continuing bit segment reducing your agency same you versus

Glenn Votek

question. Yes, that's good a very

So the been some structural look we're to of the a the consequence have for we low credits but businesses, of somewhat very And were businesses. able credit historically, the use businesses, portfolios in as a certainly and vehicle at we levers it very do that. we agency funding generally, have leverage, of core holistically across

additional what's may higher don't financing? cost for excess reduce we does reduce, portfolio. is relatively liquidity, a way our be Like We cost if on typically our MSRs, we to That But liquidity, there's standpoint, higher the cost currently our borrowings extent example, the lever from to tend financing. MSR And we evaluated highest liquidity there's the financing. may

constantly the we capital, that. fund our and optimize we'll but that we we're how are So, it liquidity, -- capital effectively, evaluating efficient portfolio on we with overall with of considerate based and use so just

Eric Hagen

make values Certainly just book to one more. on first weeks sense, the Any six the update year? of

Glenn Votek

were of a been year. exactly up night, and the flat been down. volatile on And it's Sure, almost we obviously year, books last as

Operator

ahead. question comes Please Kenneth go next Capital The of RBC from Markets. Lee

Kenneth Lee

credit towards in terms forward, bit little we think potential you capital giving allocation, agencies for where, a going Just one more should your and capital allocate relative equity credit how equity about having views allocation and between of forward? going mentioned

Glenn Votek

Sure.

because the our will say mentioned the in and reduce speaking agency my in portfolios, added namely to allocation residential space. broadly So, as our we credit I comments we credit also increased

the is episodic is Now our grow, going of of a residential really fraction it actually, persistently for businesses capital the acquiring somewhat to do bonds But think home all would example residuals loan. is more that those I hold very forward, loans. credit when we of securitization, amount say, we small there is overall like used we can are but a

agency. growth deploy residential the these want given can the in which credit to which So, of most generally commercial in the we will credit in nature the And capital to most to with credit market because extent then that's middle gracious grow doing be are, can portion we absence businesses, we but don't we the credit slow be only expect so an in think fundamentally loans, high capital, our the our them the increasing we're reduction three we attractive. quality we but businesses grow, of

them to of think with I time the the concerned into in getting but relatively evolves credit the the would stay and books, and of the range some lower of to and on we'll to going help that how relatively just close end fundamentals the we're expect pricing the being, sectors. for pricing and see somewhat we quarter be spring be flat parts

Kenneth Lee

if follow-up, Okay, may. I one very And helpful. just

topic the of on Just internalization.

of In X.XX% OpEx to you as range. of terms equity, you long-term, reduction mentioned the in percentage the X.X

Just a for key range? more get the color drivers in reduction to that little want on bit

Serena Wolfe

Serena. It's

identify opportunities general cost as to and and management So, we just as savings improving continuously at new for efficiencies course. several mentioned, a Glenn previously there's variables play team, as seek

in our XXXX, XXX that kind the estimated about point, saving of a data But we at generalization as a that disclosed had years. over of Company part million time as five transaction

OpEx have discussed was in I this savings by far our ratios the so is the presentation. previously evidenced that and actual in exceeded illustrated which that investor cost and And target,

and thought It's that's just as improvement really and management the focused what X.XX achieve. just a we target looking we're set to continuous ourselves target we team, on to represents. a so important So, it a we're to that thought X.X

Our where mentioned also operating efficient given, we we think have mentioned, projected already and as platform. annual savings achieve can very I that Glenn we reasonably a

Glenn Votek

as one had I technology efficiency. would extent investment we is the other greater mention Yes, we we that that, overtime earlier the thing indicated Serena And external. thing we of with and will we other we be that economies internalize that to incur commitments the obviously is obviously to would in the have the have scale and had not technology would otherwise raise fees incremental additional that would continue capital, the incurred drive

Operator

Matthew Nomura. Howlett The from next question comes ahead. Please go of

Matthew Howlett

want applaud the to you internalization. I for

all I segments how is where signal the market, market. appreciate some positioning are certain think refi on, do potential But if about specified all-time it when TBAs in more lows ways, rates little the level? to specialized pools up mini comments or question really you hit, of but on do versus The the the pool I sends outlook to they reach pay and of at you low point, think time with on an at a agencies. David, and mortgage have the the strong breakdown look

David Finkelstein

question. Matt, that's Sure. very good a

really deteriorated, means that's of which pools pay-ups, of we've deliverable really talked discussed about in by the that market benchmark deliverable the are not has but a the consistent as of with function about a level obviously a past. The that's elevated the past. concerned are TBA We

pools are And clearly much and so, pricing. the reflected that's quality deepest higher now specified in

investing even pay-ups, specified stack pools. down But going coupon going how light we're at forward refis we and are in light as of of the looking in

low is $X which which For with a bond modest loan point, example, example, payout, X% the little relatively bond, about in price does balance, price XX% and exposure quarter, modest. pay coupon, yield a XXXk you get with is so very generate at actually a maybe points over for up bit and or your return, XX a curve roughly $X point get you the that off a $X your roughly is hedge, basis

they going nonetheless, pick expect in investing about not last But rally for we're and speeds prepared in coupons. was given up QX, QX this demonstrably or eventual you be are QX. and lower we the down look in to you will market in be quarter-over-quarter, XX% do And QX, in So, clearly we at reifies distribution obviously that's to rally our the of QX in coupon into think hope lower until here. better this and I were see QX we coupon shape when to the reduced

Matthew Howlett

And market in prepay of bit then you XQ sort the it's certainly, well. been was in are long-term speeds dollar volatile. lowers down little that as took the -- income, and And a the roll

item So of that forward? was give up line some going nicely. you Is there can sort any guidance us

David Finkelstein

those to last consequence So, up, basis it was roughly muted were cuts QX. X rate that Number of is cuts of points XX rate two year factors. and one, obviously, we had

our attractive which was higher And as some positions, from. actually you go And those roles. coupons, adds TBA roles, to income so rate addition, benefited of those when negative role there rate that roll which on is in to that roles which cover those the I And implied short financing mentioned, dollar we more did we you names generate dollar were be short have in income.

The breakdown which we're long the was a roughly positions from from our other third two-thirds coupons. in lower and currently short positions,

we was looking what forecast in in QX, we QX, high the to but to generated proximity of quite as I of QX. -- In as don't expect we be do it terms be

thereabouts [$X.XXX] about currently, the as we low-XXs and is forecast progresses. so continues quarter maybe that So, what or

Operator

go The next question Credit comes Please from ahead. Doug Harter of Suisse.

Doug Harter

the on internalization. Just one more

kind on of new and returns change your might view might structure order of kind kind to of incremental how need not the capital? raise be wherever expenses attractive, kind Just of raising to what in having capital and

David Finkelstein

Sure.

is David, this So Doug.

as obviously, the are book. has diluted at we So year, but returns which investment we actually rates prohibitive to be not a lot way look, to That's the the is a equally not last generally. cost consideration market. or the book, available important that of not something it capital otherwise, it's capital, in were reason we look beneficial And did see do,

in with capital not So higher. but and reasonable, was raise bit point. at out as maybe saying a it's deploy returns go XX%, perfectly us to I this telling little and agency the in agency sector They're that

the the book the be our premium both and changes on and favorable. would. price generally have we and as to up, to two that here we combination factors those a to achieved it's certainly year in, at proceed basis agency of But two they Now, the speaking, then that is the extent factors line haven't and and

Operator

question comes ahead. Barclays. Please from next Mark The of go DeVries

Mark DeVries

question ratio. you for Another the OpEx on

Just that, the X.X% want what you to Is XXXX? expecting I a that think guided you're for of clarify X.X%, equity to. kind that of point

Serena Wolfed

Serena again. Hi,

the is So, no, cost behind as internalization driving we savings. previously mentioned, not the force

And not do process the XXXX, in, in our immediate of We a year, move we will savings G&A through so, transitional as our XXXX. XXXX expecting internalization. as we're cost through framework evolve

And so, in anticipate achieving target. XXXX we XXXX, target those more OpEx do not further and

Mark DeVries

ratio balance Okay, about obviously made that new that's a you dynamic add structure, structure. take sheet? grow helpful. as fees external couple that we with lines I but comments. I now incremental How would of business, your the we which equity, the And the think get add actually a as this of under think that you pursue it kind that, should sheet. should ratio the One expense to provides your with doesn't and flexibility then also is that, mean just growing color changing how of presumably would that some on want new of balance you to to

David Finkelstein

David. is this Mark, Sure,

with as So, as to external certainly raise it's we unlike the manager, interim we as going more manager. lead an efficiency to equity grow

it costs think some by not of be in associated terms with about would opportunities personnel the would REIT. that that how now that be borne require formed Now, might extra we potential

more on adjusted We're basis, going on pursue to present value look cost some income of strategic x, at potential it able y, be if it's and with it. a net got basis a a has with it, will to and risk associated it, that x revenues plus it's likely but associated we x number endeavor

it's if resources risk much a And because it's cost for with REIT managers, profitable endeavor as different so easier then the us manager, an for the external on it's an adjusted, pursue. external ongoing basis only but and have a many to we equation

Mark DeVries

equity on past think it And clarification because just the years, we elevated the MTGE Is X% what something of of last year XXXX? closer that one OpEx kind of is the because was jumped last for expect Okay. then percentage issue. the just should is I XXXX to around

Serena Wolfed

X.X, closer think I through something X.X like to it's that.

should think We're somewhat I to XXXX. be you will consistent to look anticipating XXXX it.

Operator

from Please Brock next The ahead. Instructions] [Operator comes of Vandervliet go question UBS.

Brock Vandervliet

agency was then I of on I'm OpEx Helping beat obviously kind business. much ratio you different deconstruct Good have bit little to the lower platforms wondering target. expense to even just, was Thanks. a a I base morning. play getting some the of if of only this a pure this is, model could death internalization. long-term at What very your

the speak As for lines you mix you additional at is your can that? look business, say business, of to you what the would excess of if

Glenn Votek

point. it's think I Like that. fair with start I'll a so Yes,

be cost would much it largely more cost whether that business are intensive, be intensive, our only lower. businesses, agency people more number of an four structure able credit in are to drive We a them We businesses. diverse the

then So, we what is as disclosed a would result and to the past, peers businesses we would which relative of have feel like, basis what weighted look it why look like those on in a each that.

to peers. levels far superior are Our efficiency

a individual Serena what but we get on peers. the remarks, composite in you opening really type when past, of had those you her sense in that at we businesses, relative the expense loads investment can which as each disclosed for to groups to it's look again, have of touched have And

David Finkelstein

I'll their businesses the a basis, more four is of they Brock respective efficient counterparts are those and you that synergy of sectors, on look overall and One if Yes. standalone our a than businesses. at the within that, is add to with did attributable company each thing lot

costs, not, And so, uh, earnings worthwhile associated it's cost a it's value. run, come as diversification but well there costs and a and with it certainly play we a smooth, over a, with think credit to as is that our not out the the long stream yes, bears endeavor exposure to that operating businesses it's pure clearly both do agency, our

Brock Vandervliet

and some the almost peers. and what's out origination where product prime, of what's stratifying this scratch versus at, terms than And platform separately, the marketplace in different is of other kind And your residential the are as there it what, how the other market in you mix, players Annaly's that -- we pipeline? this fix of Like already dent, to in flip. see in look

David Finkelstein

Sure.

very self So, developed in. miss deep some These credit footprint the it's they're We as the expanded and types is the FICO, we've have or credit loans sector, something the early the we're sub were prime you we've sub borrower part entrance where or that. space LTV, circumstance, doing of a above the loans. sector that XX might talked of into about XXX employed borrower the like is in good very of XX the the not near market are past, mitigating whether

And focused so on. the that's we're area really

they're our developed of partners through of on very think terms number the of our terms they rely over I relationships us to in originator very, become doing last the ability has ingrained how years, we've extensively purchase in loans. business and

like And a of we're space in us so mover good helped were you the we've that continue we the that's And on. quarter-over-quarter, feel and going our flow somewhat business to loans out. accelerated in and look so, with a we're generated to if first the that's place where the in efforts and at that repurchases we focus

Operator

Glenn for to our turn I over back concludes conference to question-and-answer Votek session. like closing the This any remarks. would

Glenn Votek

thanks that year. build from our demonstrated prospects This momentum the on accomplished the all and we've our as we're quarter of outlook optimistic of resilience strategy in in and we We're last past XXXX. Great, operator. very proud

that about more our excited confident that on internalization highly and talented, by supported positioning businesses We're delivering also and continue of significant our will diverse XXX dedicated the than the for the team professionals shareholders. are our value

quarter. Thank continued and interest And forward we your speaking joining Annaly. for to you look you in all the to next for call

Operator

Thank The concluded. for you today's conference attending presentation. has now

now disconnect. You may

Annaly Capital Management (NLY) 13 Feb 202019 Q4 Earnings call transcript