On Wednesday, Citi reiterated its Neutral rating for New York Community Bancorp (NYSE:NYCB), with a consistent stock price target of $3.50. The coverage was transferred to analyst Benjamin Gerlinger, who has made adjustments to the firm's model in anticipation of the first-quarter 2024 earnings.
The analysis by Citi comes after NYCB disclosed a deposit runoff during the quarter. Despite a $1.05 billion equity investment that mitigates immediate concerns regarding multi-family and commercial real estate (CRE) credit, there are still challenges ahead.
The bank has reportedly experienced a shift in its deposit mix, favoring broker deposits over lower-cost private bank deposits, a move that is expected to put further pressure on net interest margin (NIM) trends.
Gerlinger noted that New York Community Bancorp concluded the quarter with a significant negative mix shift. This shift is anticipated to impact the bank's profitability, as it may lead to reduced net interest income (NII).
The analyst also pointed out that management is likely to focus on decreasing concentrations in multi-family and CRE lending while also reducing the overall size of the bank's balance sheet in the upcoming update later this month.
Citi has maintained its stock price target for NYCB at $3.50, which is based on an assumed 8% normalized return on tangible common equity (ROTCE). The current market price of NYCB's stock is close to this target, suggesting that the market has already factored in an optimistic scenario for the bank's return rates.
Gerlinger concluded by stating that given the stock's proximity to the target price and the potential risks, there are more attractive investment opportunities elsewhere, justifying the firm's decision to maintain a Neutral rating.
InvestingPro Insights
In light of Citi's recent neutral stance on New York Community Bancorp (NYSE:NYCB), a deeper dive into the company's financials and market performance through InvestingPro reveals some notable metrics.
NYCB's Price / Book multiple is attractively low at 0.29, suggesting that the stock may be undervalued relative to its book value, which could interest value-oriented investors. Additionally, the bank has demonstrated a remarkable Revenue Growth of 107.25% in the last twelve months as of Q4 2023, a sign of significant top-line expansion.
Still, it is important to consider that analysts have revised their earnings downwards for the upcoming period, and they anticipate a sales decline in the current year. These revisions could be reflective of the deposit mix shift and pressure on net interest margin trends that Citi's analyst highlighted.
Moreover, NYCB has been maintaining dividend payments for over three decades, which could be a factor for income-focused investors, despite the recent price volatility and overall negative market sentiment as evidenced by a 60.33% decline in the stock's one-year total return.
For those considering NYCB as a potential investment, there are additional InvestingPro Tips available, providing a comprehensive analysis of the stock's performance and future outlook. To gain further insights and explore these tips, visit https://www.investing.com/pro/NYCB. And don't forget, you can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With a total of 11 additional InvestingPro Tips available, investors can make a more informed decision regarding NYCB.
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