Banking, finance, and taxes
Annaly Earnings Welcome the End of QE
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Net interest margin for this quarter was 1.61%, compared to 1.57% in the June quarter and 1.34% year over year. Investment securities, which are comprised of agency mortgage-backed securities and agency debentures, totaled $82.8 billion at the end of September.
The constant prepayment rate for the third quarter was 9%, up from 7% sequentially and down from 13% in the third quarter of the previous year.
At the end of the quarter, the company had outstanding interest rate swaps with a net notional amount of $31.5 billion and interest rate swaptions with a net notional amount of $1.9 billion, representing 48% of the company’s repurchase agreements.
The company has a strong capital position with a capital ratio of 15% and leverage of 5.4:1. The common stock has a book value of $12.87 per share.
Wellington J. Denahan, chairman and CEO of Annaly, said:
We welcome the end of Quantitative Easing and look forward to the opportunities it presents as the mortgage market begins to adjust to fewer direct policy impacts on fundamentals. We expect the market to endure higher levels of volatility but remain comfortable in our continued ability to deliver attractive relative returns.
A recent analyst call for Annaly came in mid-September when Citigroup reiterated a Neutral rating but raised its price target to $11 from $10.
Annaly stock closed Wednesday even at $11.34. Following the release of the earnings report, the initial response in the post market was positive and shares were up about 0.3% at $11.38.
The company’s stock has a consensus analyst price target of $11.81 and a 52-week trading range of $9.66 to $11.95. Annaly has a market cap of about $10 billion.
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