On Jul 5, we issued an updated research report on New York Community Bancorp (NYCB - Free Report) . The company’s strong balance sheet, cost-containment efforts and improving credit quality are key tailwinds. However, higher interest rates offset top-line growth to some extent due to liability-sensitive balance sheet.
The company’s strong balance sheet position enables it to strengthen business through strategic initiatives. Notably, loans and deposits saw a five-year CAGR (2014-2018) of 2.9% and 2.1%, respectively. Further, with the improving economic backdrop, the company is likely to continue witnessing rise in loans and deposits.
New York Community continues to focus on reducing expenses. Its exit from mortgage banking business, branch closures and lower operating expenses helped in cutting costs. Notably, it signed a deal with Fiserv, whereby the latter will provide a new enterprise-wide banking platform (by fourth-quarter 2019), which is expected to result in substantial cost savings and efficiencies, beginning 2020.
Further, improving asset quality remains a key tailwind. The ratio of non-performing loans to total loans and allowances for loan losses to total loans have improved significantly over the last five years (ended 2018). An improving credit quality should keep supporting its growth.
Looking at the company’s price performance, its shares have gained 8.8% year to date compared with the 15.8% growth of the industry.
New York Community’s declining net interest margin was perhaps responsible for the stock’s underperformance over the past year. Also, rise in cost of funds and a liability-sensitive balance sheet remain major negatives.
Further, lack of sufficient capital-deployment activities by the company can affect investor confidence in the stock.
Also, it has failed to impress analysts as the Zacks Consensus Estimate for current-year earnings has been revised 2.5% downward over the last 30 days.
New York Community currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks in the same space are Northwest Bancshares, Inc. (NWBI - Free Report) , Dime Community Bancshares, Inc. (DCOM - Free Report) and Citizens Financial Services Inc. (CZFS - Free Report) . All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Northwest Bancshares’ current-year earnings has been revised slightly upward for 2019 in the past 60 days. Also, its share price has increased nearly 1% in the past six months.
Dime Community’s current-year earnings estimates have been revised 1.5% upward over the past 60 days. Further, the company’s shares have rallied 6.1% in the past six months.
The Zacks Consensus Estimate for Citizens Financial Services’ current-year earnings has been revised nearly 1% upward over the past 60 days. Moreover, in the past six months, its shares have gained 10%.
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