On Monday, Wedbush maintained its underperform rating and $3.00 price target for New York Community Bancorp (NYSE:NYCB) shares. The firm adjusted its financial model for NYCB, citing an earlier than expected conversion of the bank's preferred equity shares to common shares. The revision follows NYCB's recent conference call, where the conversion timeframe was stated to be within six months of issuance.
The updated model now excludes the preferred dividends, reducing the expected quarterly dividend from $38 million to $8 million. Additionally, Wedbush has revised its reserve build assumptions for the first quarter of 2024, increasing the provision to $600 million from the previously estimated $300 million. This change reflects the bank's intention, expressed during the conference call, to improve its below-average Allowance for Credit Losses (ACL) coverage ratio.
As a result of these adjustments, Wedbush lowered its 2024 earnings estimate for NYCB to a loss of $0.26 per share from a loss of $0.15 per share. The projection for 2025 has been raised to earnings of $0.30 per share from $0.20 per share, taking into account the elimination of preferred dividends due to the anticipated conversion of preferred equity.
The underperform rating is reinforced by concerns over NYCB's significant portion of loans in the rent-regulated multifamily sector in New York City, which Wedbush believes are currently under stress. This loan category constitutes 22% of NYCB's total loan portfolio. The price target of $3.00 is derived from a valuation of 10 times the firm's 2025 earnings per share estimate and equates to 55% of the pro forma first-quarter tangible book value (TBV) of $5.50.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.