We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
New York Community (NYCB) Aided by High Margins Amid Cost Woes
Read MoreHide Full Article
New York Community Bancorp, Inc.’s strategic acquisitions, solid loan and deposit balances, manageable debt level, and robust liquidity are likely to keep supporting financials. Yet, increasing expenses, deteriorating asset quality and geographic concentration are headwinds.
New York Community’s strategic acquisitions have enabled it to scale operations. In March 2023, it acquired $38 billion of assets and assumed $36 billion of liabilities of Signature Bank from the Federal Deposit Insurance Corporation. Through this, management transformed its bank subsidiary, Flagstar, from a multi-family lender to a diversified full-service commercial bank.
Also, NYCB’s merger deal with Flagstar offered it a national scale of operation by enhancing its foothold in Northeast/Midwest regions, giving it exposure to high-growth markets.
New York Community has a strong balance sheet. Deposits and net loans saw a positive compound annual growth rate (CAGR) in the three-year period ended 2022. The rising trend continued in the first quarter of 2023. The acquisition of Signature Bank improved NYCB’s deposit base and initiated its commercial middle-market lending business.
The addition of low-cost deposits from the Signature Bank acquisition and variable rate loan portfolio from the Flagstar merger has improved NYCB’s overall funding costs. This is expected to aid net interest margin (NIM) growth. In second-quarter 2023, management expects NIM to expand 2.7-2.8% on a sequential basis.
Also, the company expects net return on mortgage servicing rights to be 8-10% in 2023. This is likely to have a positive impact on non-interest income.
New York Community’s capital deployment activities are decent. Apart from paying out 17 cents per share as a quarterly dividend, the company has a share repurchase program in place. It had approximately $9 million remaining under this authorization as of Mar 31, 2023.
Cash and cash equivalents at the first-quarter 2023 end were $22.25 billion, whereas total borrowed funds were $21.36 billion. Hence, given the ample liquidity and earnings strength, its capital-deployment activities seem sustainable and may further stoke investors’ confidence in the stock.
However, New York Community’s increasing expense base acts as a headwind. Total operating expenses have seen an increasing trend over the past few years, witnessing a positive CAGR over the last four years (ended 2022). The rising trend continued in the first quarter of 2023.
The non-interest expenses (excluding merger-related expenses, intangible asset amortization and the impacts of the Signature Bank acquisition) for 2023 is expected to be $1.3-1.4 billion. Hence, such a rise in expenses will increase the bottom-line pressure.
New York Community’s asset quality has deteriorated considerably. Non-performing assets increased substantially year over year to $153 million in 2022. The rising trend continued in the first quarter of 2023. Provision for credit losses was $4 million for 2021, while the provision for credit losses totaled $124 million for 2022. The rising trend continued in first-quarter 2023. Hence, its asset quality is likely to decline in the upcoming quarters.
A significant portion of New York Community’s multi-family and commercial real estate loans is concentrated in the Metro New York region. This makes the company vulnerable to potential economic or political doldrums in the region.
Shares of this Zacks Rank #3 (Hold) company have gained 15.4% against a 33.9% decline recorded by the industry over the past year.
A couple of better-ranked stocks from the banking space are Mitsubishi UFJ Financial Group, Inc. (MUFG - Free Report) and Pathward Financial Inc. (CASH - Free Report) , each currently carrying a Zacks Rank #2 (Buy).
Earnings estimates for MUFG have been revised 1.3% upward for 2023 over the past 60 days. The company’s shares have gained 27.2% over the past six months.
The consensus estimate for CASH’s 2023 earnings has been revised 1.8% upward over the past 30 days. Over the past six months, the company’s share price has increased 2.9%.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
New York Community (NYCB) Aided by High Margins Amid Cost Woes
New York Community Bancorp, Inc.’s strategic acquisitions, solid loan and deposit balances, manageable debt level, and robust liquidity are likely to keep supporting financials. Yet, increasing expenses, deteriorating asset quality and geographic concentration are headwinds.
New York Community’s strategic acquisitions have enabled it to scale operations. In March 2023, it acquired $38 billion of assets and assumed $36 billion of liabilities of Signature Bank from the Federal Deposit Insurance Corporation. Through this, management transformed its bank subsidiary, Flagstar, from a multi-family lender to a diversified full-service commercial bank.
Also, NYCB’s merger deal with Flagstar offered it a national scale of operation by enhancing its foothold in Northeast/Midwest regions, giving it exposure to high-growth markets.
New York Community has a strong balance sheet. Deposits and net loans saw a positive compound annual growth rate (CAGR) in the three-year period ended 2022. The rising trend continued in the first quarter of 2023. The acquisition of Signature Bank improved NYCB’s deposit base and initiated its commercial middle-market lending business.
The addition of low-cost deposits from the Signature Bank acquisition and variable rate loan portfolio from the Flagstar merger has improved NYCB’s overall funding costs. This is expected to aid net interest margin (NIM) growth. In second-quarter 2023, management expects NIM to expand 2.7-2.8% on a sequential basis.
Also, the company expects net return on mortgage servicing rights to be 8-10% in 2023. This is likely to have a positive impact on non-interest income.
New York Community’s capital deployment activities are decent. Apart from paying out 17 cents per share as a quarterly dividend, the company has a share repurchase program in place. It had approximately $9 million remaining under this authorization as of Mar 31, 2023.
Cash and cash equivalents at the first-quarter 2023 end were $22.25 billion, whereas total borrowed funds were $21.36 billion. Hence, given the ample liquidity and earnings strength, its capital-deployment activities seem sustainable and may further stoke investors’ confidence in the stock.
However, New York Community’s increasing expense base acts as a headwind. Total operating expenses have seen an increasing trend over the past few years, witnessing a positive CAGR over the last four years (ended 2022). The rising trend continued in the first quarter of 2023.
The non-interest expenses (excluding merger-related expenses, intangible asset amortization and the impacts of the Signature Bank acquisition) for 2023 is expected to be $1.3-1.4 billion. Hence, such a rise in expenses will increase the bottom-line pressure.
New York Community’s asset quality has deteriorated considerably. Non-performing assets increased substantially year over year to $153 million in 2022. The rising trend continued in the first quarter of 2023. Provision for credit losses was $4 million for 2021, while the provision for credit losses totaled $124 million for 2022. The rising trend continued in first-quarter 2023. Hence, its asset quality is likely to decline in the upcoming quarters.
A significant portion of New York Community’s multi-family and commercial real estate loans is concentrated in the Metro New York region. This makes the company vulnerable to potential economic or political doldrums in the region.
Shares of this Zacks Rank #3 (Hold) company have gained 15.4% against a 33.9% decline recorded by the industry over the past year.
Image Source: Zacks Investment Research
New York Community currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Bank Stocks Worth Considering
A couple of better-ranked stocks from the banking space are Mitsubishi UFJ Financial Group, Inc. (MUFG - Free Report) and Pathward Financial Inc. (CASH - Free Report) , each currently carrying a Zacks Rank #2 (Buy).
Earnings estimates for MUFG have been revised 1.3% upward for 2023 over the past 60 days. The company’s shares have gained 27.2% over the past six months.
The consensus estimate for CASH’s 2023 earnings has been revised 1.8% upward over the past 30 days. Over the past six months, the company’s share price has increased 2.9%.