Regional banking company New York Community Bancorp NYCB has been increasingly volatile after announcing a new $1 billion equity infusion from investors and changes to its management.
Analysts size up the changes and what a recent company update means for the stock going forward.
The New York Community Bancorp Analysts:
- Wedbush analyst David J. Chiaverini has an Underperform rating and price target of $3.
- DA Davidson analyst Peter J. Winter has a Neutral rating and price target of $4.
- Bank of America analyst Ebrahim H. Poonawala has a Neutral rating and lowers the price target from $5 to $4.25.
- JPMorgan analyst Steven Alexopoulos has a Neutral rating and withdraws a previous price target of $5.50.
Related Link: Mnuchin Sees Opportunity To Turn New York Community Bancorp Into ‘Very Attractive’ Regional Bank, Highlights Valuation Upside
Wedbush on NYCB: The conference call from the bank showed deposits down modestly, Chiaverini said in an updated investor note.
"Our takeaways from the deal remain largely the same: this is very dilutive, but necessary deal for NYCB in order to shore up its capital base and reassure depositors," Chiaverini said after the company's conference call.
The analyst said the banking company plans to provide more clarity on its strategic actions in April. Chiaverini said the actions could include asset sales and a reduction in commercial real estate concentration.
DA Davidson on NYCB: The hiring of Joseph Otting, who was introduced as CEO on the call, is well suited for a turnaround, Winter said.
The analyst said Otting, who will become CEO on April 1, is backed by a more sophisticated board of directors.
"The new management team and new chief risk officer are still undertaking a more thorough analysis of the loan portfolio and risk controls," Winter said.
Winter added that the faster the company can get credit issues behind them, the quicker the stock could have uncertainty removed.
"But don't expect this to all happen in 1Q24."
The analyst called the equity deal as a necessary measure to keep the bank from failing, but highlighted how dilutive the deal is for existing shareholders.
"Incoming CEO, Joseph Otting has the background to help turnaround the franchise. He was the former Comptroller of the Currency, and importantly, he has worked very closely with Steven Mnuchin, former Treasury Secretary, whose investment company, Liberty Strategic Capital, is investing $450M in this deal."
Winter reminds investors that an investment group led by Mnuchin bought struggling bank IndyMac during the 2008 financial crisis and renamed it and also brought Otting in as the CEO before selling the bank later in 2022.
The analyst said the new cash infusion gives the company "more breathing room to do what is right for the business."
Bank of America on NYCB: Despite the cash infusion, Poonawala sees "heavy lifting ahead" for the bank as a de-risking of the balance sheet needs to take place.
"Our sense is that while well-informed on the big picture issues, the new investor group and the incoming CEO are only beginning to get up to speed on the strategic review process that mgmt. kicked-off last month," Poonawala said.
The analyst said the capital infusion and credibility of the new investors could help the bank buy some time for the future.
"However, there is heavy lifting ahead and the shape, timing and the probability of success of any potential turnaround remains an unknown."
JPMorgan on NYCB: The cash injection could be a step in the right direction, but further actions are likely needed, Alexopoulos said in an investor note.
The analyst said the hiring of Otting could be a positive, given his experience and reputation.
"Even with this positive step for the company, the path ahead remains uncertain for equity investors, with the key question being whether this capital raise is the last capital action required," Alexopoulos said.
The analyst noted that the thorough examination of the balance sheet by the company’s new management team introduces uncertainty, as it may necessitate further strategic measures.
"We believe the company is signaling that reserves will need to increase further with the exact amount to be determined."
The analyst said it could be best for investors to wait for an entry point when the risks are better understood for the future of the company.
NYCB Price Action: New York Community Bancorp shares are down 8% to $3.36 on Friday, versus a 52-week trading range of $1.70 to $14.22. Shares of the bank are down 64% year-to-date in 2024.
Read Next: New York Community Bancorp Got ‘Much-Needed Lifeline,’ But Deal ‘Tremendously’ Hurts Shareholders
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