New York Community Bancorp Shares Sink As Q4 Performance Shakes Analyst Confidence

New York Community Bancorp Inc NYCB shares are trading lower after several analysts downgraded the stock following the fourth-quarter results.

Earlier this week, the bank reported revenue of $740 million, which missed the consensus estimate of $811.07 million, and an adjusted EPS loss of $(0.27), which missed forecasts for positive earnings of $0.28.

The company recorded a $552 million provision for loan losses in the fourth quarter and cut its quarterly dividend to $0.05 per share to help accelerate the building of capital to support its balance sheet.

The bank expects FY24 net interest income of $2.8 billion-$2.9 billion.  

Also Read: Regional Banks Suffer Worst 2-Day Slump Since March 2023 Crisis As Investors Scrutinize Commercial Real Estate Risks

Wedbush analyst David J. Chiaverini reiterated Underperform rating with a price target of $6, citing the company’s above-average CRE exposure and the risk posed as these loans mature or reset/reprice at higher rates.

The analyst is raising core EPS estimates to $0.80 (from $0.65) in FY24 and $0.90 (from $0.75) in FY25 on higher average earning asset and net interest income assumptions following the company’s guidance update.

RBC Capital Markets analyst Jon G. Arfstrom downgraded the stock to Sector Perform from Outperform with a reduced price target of $7 (from $13). The analyst is moving to the sidelines due to the expected growing pains from being a larger bank to weigh on earnings in the near-to-medium term and the need for the management to outperform on credit to regain investor confidence.

The analyst notes the company’s results had several negative surprises, including a higher-than-expected provision and reserve build, a meaningfully lower margin and outlook, and a dividend cut announcement, which are related to the company crossing the $100 billion asset mark and becoming a Category IV financial institution. 

This has led to increased liquidity and compliance needs, and the FY24 outlook suggests further margin and expense pressures, writes the analyst.

Consequently, the analyst lowered EPS estimates to $0.75 (from $1.40) for FY24 and $0.85 (from $1.60) for FY25.

BofA Securities analyst Ebrahim H. Poonawala cut the price target to $8.50 from $13.00 and reiterated a Buy rating.

The analyst says that although he expected a certain degree of reserve build related to the impact of higher interest rates on its commercial real estate (CRE) borrowers, the urgency with which banking regulators (OCC chartered) are requiring NYCB to boost liquidity/capital/credit reserves was surprising.

The analyst cut EPS estimates by 31% to $0.80 in FY24 and 27% to $1.00 in FY25, owing to a lower net interest income (NII) outlook. 

Also, Jefferies analyst Casey Haire slashed New York Community Bancorp’s price target from $13 to $7 and downgraded the stock from Buy to Hold. Raymond James analyst Steve Moss downgraded New York Community from Strong Buy to Market Perform.

Price Action: NYCB shares are down 4.79% at $6.16 on the last check Thursday. 

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