On Feb 7, we issued an updated research report on New York Community Bancorp NYCB. The company’s strong balance sheet, declining expenses and improving credit quality are key tailwinds. However, declining fee income offsets top-line growth to some extent.
The company’s strong balance sheet position enables it to strengthen business through strategic initiatives. Loans and deposits saw a five-year CAGR (2015-2019) of 2.4% and 2.7%, 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 it in cutting costs. Notably, it signed a deal with Fiserv, per which, the latter provided a new enterprise-wide banking platform (in fourth-quarter 2019). This 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 2019). An improving credit quality should keep supporting its growth.
Looking at the company’s price performance, its shares have lost 5.8% over the past year against the 5.3% growth of the industry.
New York Community’s declining fee income was perhaps responsible for the stock’s underperformance over the past year. The company must utilize excess funds toward business development in order to support its top line.
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 2.3% downward over the past 30 days.
New York Community currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks in the same space are Flushing Financial Corporation FFIC, Investors Bancorp, Inc. ISBC and ServisFirst Bancshares, Inc. SFBS. All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Flushing Financial current-year earnings has been revised 5.3% upward for current year in the past 60 days. Also, its share price has increased nearly 6% in the past six months.
Investors Bancorp’s current-year earnings estimates have been revised 10.6% upward over the past 60 days. Further, the company’s shares have rallied 10.1% in the past six months.
The Zacks Consensus Estimate for ServisFirst’s current-year earnings has been revised nearly 7% upward over the past 60 days. Moreover, in the past six months, its shares have gained 28.5%.
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