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New York Community (NYCB) Swings to Loss in Q4, Stock Tanks 37.7%
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New York Community Bancorp’s (NYCB - Free Report) shares plunged 37.7% as it reported a net loss in the fourth quarter of 2023 on higher-than-expected provisions for credit losses. This led Moody’s to place the bank’s credit rating under review for a downgrade on its huge exposure to commercial real estate loans. Further, the company’s announcement of cutting the quarterly dividend by 71% added fuel to the fire.
NYCB reported the fourth-quarter 2023 loss of 27 cents per share against earnings of 36 cents in the year-ago quarter. The Zacks Consensus Estimate for earnings was pegged at 29 cents per share.
The results were primarily affected by a significant rise in provisions for credit losses and expenses. A fall in non-interest income and lower deposit balance were additional concerns. However, substantial growth in net interest income (NII) and solid loan balance acted as tailwinds.
The results excluded certain non-recurring items. After considering these, the net loss available to common shareholders was $252 million. The net income to common shareholders was $207 million in the prior-year quarter.
In 2023, adjusted earnings per share were 80 cents, which declined 35% year over year and missed the Zacks Consensus Estimate of $1.36. Net income available to common shareholders was $2.3 billion, which increased substantially from $617 million year over year.
Revenues & Expenses Rise
Quarterly revenues were $886 million, which soared 53.6% from the prior-year quarter. However, the top line missed the Zacks Consensus Estimate of $935.9 million.
In 2023, total revenues were $5.8 billion, which increased significantly from $1.6 billion year over year and surpassed the Zacks Consensus Estimate of $3.7 billion.
NII was $740 million, up 95.3% from the prior-year quarter. The surge was mainly driven by the Flagstar acquisition (closed in late 2022) and the Signature Bank buyout (completed in late March 2023). The net interest margin of 2.82% was up 54 basis points.
Non-interest income was $146 million, down 26.3% year over year. The primary reason for the decline was lower bargain purchase gain.
Non-interest expenses of $695 million surged drastically from the $269 million reported in the year-ago quarter. Total operating expenses (excluding merger-related and restructuring expenses and intangible asset amortization) increased substantially to $596 million from $204 million.
The efficiency ratio was 67.86%, up from 48.82% year over year. A rise in the efficiency ratio indicates deteriorating profitability.
Loans Rises, Deposit Balance Down
Total loans and leases held for investment rose nearly 1% sequentially to $84.6 billion as of Dec 31, 2023. The rise was driven by growth in C&I and residential mortgage portfolio. As of Dec 31, 2023, multi-family loans represented 44% of total loans held for investment and commercial loans represented 46% of total loans.
As of Dec 31, 2023, total deposits decreased 1.6% sequentially to $81.4 billion. The decline was mainly due to lower non-interest-bearing deposits, partially offset by an increase in certificates of deposits.
Credit Quality Deteriorates
Non-performing assets were $442 million, which increased significantly from $153 million as of Dec 31, 2022.
Also, provision for credit losses were $552 million, which increased substantially from $124 million in the prior-year quarter. The rise was aimed at addressing weaknesses in the office sector, potential repricing risks in the multi-family portfolio and an increase in classified assets.
Net charge-offs were $185 million, up from $1 million in the prior-year quarter.
Capital Ratios: A Mixed Bag
As of Dec 31, 2023, the common equity tier 1 ratio was 9.10%, which increased from 9.06% as of Dec 31, 2022. The total risk-based capital ratio was 11.82%, which rose from 11.66%.
The leverage capital ratio was 7.78%, which declined from 9.70%.
Dividend Cut
On Jan 30, New York Community declared a quarterly cash dividend of 5 cents per share, reducing it 71% sequentially. The dividend will be paid out on Feb 28, recorded as of Feb 14. The company announced the dividend cut with an aim to build capital.
Thomas R. Cangemi, the CEO of NYCB, noted, “We believe this is the prudent decision as it will allow us to accelerate the building of capital to support our balance sheet as a Category IV bank.”
Conclusion
New York Community has been gaining from the strategic acquisitions completed over the past couple of years.
As the operating environment turned challenging, the company had to take huge reserves in the fourth quarter of 2023 to cover delinquencies in commercial real estate loans. This substantially hurt its financials and also led Moody’s to place the company’s ratings under review for a downgrade.
The rating agency cited NYCB’s subdued earnings, exposure to office and multifamily real estate loans and a fall in capital levels as the major reasons behind the move. Also, it noted that a rise in regulations results in increased compliance costs.
New York Community Bancorp, Inc. Price, Consensus and EPS Surprise
Zions Bancorporation’s (ZION - Free Report) fourth-quarter 2023 adjusted net earnings per share of $1.29 surpassed the Zacks Consensus Estimate of $1. However, the bottom line decreased 29.9% from the year-ago quarter.
ZION’s results were primarily aided by nil provisions and improvement in loan balance. However, elevated adjusted non-interest expenses and a decline in NII and non-interest income were the major headwinds.
Huntington Bancshares Incorporated (HBAN - Free Report) reported fourth-quarter 2023 earnings per share of 27 cents (excluding non-recurring items), surpassing the Zacks Consensus Estimate of 26 cents. However, the bottom line declined from the prior-year figure of 42 cents.
HBAN’s results have reflected improvements in average loans and deposits. However, a fall in NII and elevated expenses were headwinds.
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New York Community (NYCB) Swings to Loss in Q4, Stock Tanks 37.7%
New York Community Bancorp’s (NYCB - Free Report) shares plunged 37.7% as it reported a net loss in the fourth quarter of 2023 on higher-than-expected provisions for credit losses. This led Moody’s to place the bank’s credit rating under review for a downgrade on its huge exposure to commercial real estate loans. Further, the company’s announcement of cutting the quarterly dividend by 71% added fuel to the fire.
NYCB reported the fourth-quarter 2023 loss of 27 cents per share against earnings of 36 cents in the year-ago quarter. The Zacks Consensus Estimate for earnings was pegged at 29 cents per share.
The results were primarily affected by a significant rise in provisions for credit losses and expenses. A fall in non-interest income and lower deposit balance were additional concerns. However, substantial growth in net interest income (NII) and solid loan balance acted as tailwinds.
The results excluded certain non-recurring items. After considering these, the net loss available to common shareholders was $252 million. The net income to common shareholders was $207 million in the prior-year quarter.
In 2023, adjusted earnings per share were 80 cents, which declined 35% year over year and missed the Zacks Consensus Estimate of $1.36. Net income available to common shareholders was $2.3 billion, which increased substantially from $617 million year over year.
Revenues & Expenses Rise
Quarterly revenues were $886 million, which soared 53.6% from the prior-year quarter. However, the top line missed the Zacks Consensus Estimate of $935.9 million.
In 2023, total revenues were $5.8 billion, which increased significantly from $1.6 billion year over year and surpassed the Zacks Consensus Estimate of $3.7 billion.
NII was $740 million, up 95.3% from the prior-year quarter. The surge was mainly driven by the Flagstar acquisition (closed in late 2022) and the Signature Bank buyout (completed in late March 2023). The net interest margin of 2.82% was up 54 basis points.
Non-interest income was $146 million, down 26.3% year over year. The primary reason for the decline was lower bargain purchase gain.
Non-interest expenses of $695 million surged drastically from the $269 million reported in the year-ago quarter. Total operating expenses (excluding merger-related and restructuring expenses and intangible asset amortization) increased substantially to $596 million from $204 million.
The efficiency ratio was 67.86%, up from 48.82% year over year. A rise in the efficiency ratio indicates deteriorating profitability.
Loans Rises, Deposit Balance Down
Total loans and leases held for investment rose nearly 1% sequentially to $84.6 billion as of Dec 31, 2023. The rise was driven by growth in C&I and residential mortgage portfolio.
As of Dec 31, 2023, multi-family loans represented 44% of total loans held for investment and commercial loans represented 46% of total loans.
As of Dec 31, 2023, total deposits decreased 1.6% sequentially to $81.4 billion. The decline was mainly due to lower non-interest-bearing deposits, partially offset by an increase in certificates of deposits.
Credit Quality Deteriorates
Non-performing assets were $442 million, which increased significantly from $153 million as of Dec 31, 2022.
Also, provision for credit losses were $552 million, which increased substantially from $124 million in the prior-year quarter. The rise was aimed at addressing weaknesses in the office sector, potential repricing risks in the multi-family portfolio and an increase in classified assets.
Net charge-offs were $185 million, up from $1 million in the prior-year quarter.
Capital Ratios: A Mixed Bag
As of Dec 31, 2023, the common equity tier 1 ratio was 9.10%, which increased from 9.06% as of Dec 31, 2022. The total risk-based capital ratio was 11.82%, which rose from 11.66%.
The leverage capital ratio was 7.78%, which declined from 9.70%.
Dividend Cut
On Jan 30, New York Community declared a quarterly cash dividend of 5 cents per share, reducing it 71% sequentially. The dividend will be paid out on Feb 28, recorded as of Feb 14. The company announced the dividend cut with an aim to build capital.
Thomas R. Cangemi, the CEO of NYCB, noted, “We believe this is the prudent decision as it will allow us to accelerate the building of capital to support our balance sheet as a Category IV bank.”
Conclusion
New York Community has been gaining from the strategic acquisitions completed over the past couple of years.
As the operating environment turned challenging, the company had to take huge reserves in the fourth quarter of 2023 to cover delinquencies in commercial real estate loans. This substantially hurt its financials and also led Moody’s to place the company’s ratings under review for a downgrade.
The rating agency cited NYCB’s subdued earnings, exposure to office and multifamily real estate loans and a fall in capital levels as the major reasons behind the move. Also, it noted that a rise in regulations results in increased compliance costs.
New York Community Bancorp, Inc. Price, Consensus and EPS Surprise
New York Community Bancorp, Inc. price-consensus-eps-surprise-chart | New York Community Bancorp, Inc. Quote
NYCB currently has a Zacks Rank #5 (Strong Sell).
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Banks
Zions Bancorporation’s (ZION - Free Report) fourth-quarter 2023 adjusted net earnings per share of $1.29 surpassed the Zacks Consensus Estimate of $1. However, the bottom line decreased 29.9% from the year-ago quarter.
ZION’s results were primarily aided by nil provisions and improvement in loan balance. However, elevated adjusted non-interest expenses and a decline in NII and non-interest income were the major headwinds.
Huntington Bancshares Incorporated (HBAN - Free Report) reported fourth-quarter 2023 earnings per share of 27 cents (excluding non-recurring items), surpassing the Zacks Consensus Estimate of 26 cents. However, the bottom line declined from the prior-year figure of 42 cents.
HBAN’s results have reflected improvements in average loans and deposits. However, a fall in NII and elevated expenses were headwinds.