Benzinga - by Piero Cingari, Benzinga Staff Writer.
Shares of New York Community Bancorp (NYSE:NYCB) were tumbling more than 10% to below the $4 mark in Wednesday morning trading, hitting their lowest level since March 1997. The stock was halted on a circuit breaker to the downside before resuming trading.
This steep decline comes amid ongoing concerns about the bank’s exposure to troubled commercial real estate loans.
On Tuesday, two U.S. investment banks issued mixed reports on NYCB:
- Bank of America downgraded the stock from Overweight to Neutral and lowered the price target from $8.50 to $5.
- JPMorgan downgraded NYCB from Overweight to Neutral and lowered the price target from $11.50 to $5.50.
- Piper Sandler reiterated its Overweight rating, maintaining its $8 price target.
A cold shower came from ratings agencies that downgraded NYCB’s credit rating:
- Fitch downgrade NYCB’s long-term credit rating to one notch above non-investment grade at BBB-.
- Moody’s downgraded NYCB's debt rating from Baa3 to Ba2.
Chart: NYCB Tumbles To March 1997 Levels
Bank of America Drops Bull Stance On NYCB
Bank of America downgraded NYCB from Overweight to Neutral and lowered the price target, stating the persistent sell-off in NYCB’s stock, driven by perceived risks associated with its commercial real estate portfolio and increased regulatory scrutiny, “is likely to weigh on the EPS outlook and on investor sentiment to add exposure to the stock.”Despite the bank’s sufficient liquidity to weather the storm, the negative publicity could adversely affect customer behavior and lead to an unexpected rise in deposit costs, said analyst Ebrahim Poonawala.
Even with a 50% drop in non-interest-bearing deposits, the bank could stay profitable, though this scenario poses significant risks to earnings per share forecasts, he said.
JPMorgan Is ‘Out Of Comfort Zone’ On NYCB
JPMorgan’s latest note on NYCB highlighted the challenges ahead, particularly from ratings agency downgrades impacting its ability to raise long-term debt.This situation is exacerbated by proposed regulatory changes that will potentially increase NYCB’s funding costs.
“With new questions to be answered and likely more negative catalysts than positive catalysts, the risk profile has pushed us out of our comfort zone,” the note said.
Despite NYCB’s low valuation, trading at 0.4x 2024 estimated TBV, JPMorgan analyst Steven Alexopoulos sees more downside risk, leading to a downgrade to Neutral and slashing the December 2024 price target from $11.50 to $5.50.
Piper Sandler Remains Bullish On NYCB
Analyst Mark Fitzgibbon offered a more optimistic view, citing the bank’s “markedly better” than anticipated liquidity and deposit positions.NYCB’s concerns will be alleviated, especially with first-quarter earnings expected to be less dramatic in April, the analyst said.
“We are cautiously optimistic that credit will hold up.”
NYCB shares are trading at significantly lower multiples compared to peers — about 42% of tangible book value and 6.4 times their 2024 EPS estimate, which is slightly below the Street consensus.
Fitzgibbon argued for a “healthy upward revaluation in NYCB shares” and reiterated an Overweight rating, sticking to a $8 per share price target.
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Photo via Shutterstock.
Latest Ratings for NYCB
| Jul 2021 | Credit Suisse | Maintains | Neutral | |
| Apr 2021 | Credit Suisse | Maintains | Neutral | |
| Apr 2021 | Credit Suisse | Maintains | Neutral |
View the Latest Analyst Ratings
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