MW NYCB's earnings estimates have tumbled as loss looms after tough quarter
By Steve Gelsi
Troubled community bank is slated to report quarterly earnings next week and estimates have been coming down
New York Community Bancorp's projected first-quarter performance has swung deep into the red after the bank's surprise loss from the previous quarter and steep stock drops in February and March.
NYCB $(NYCB)$ also raised $1 billion in capital to shore up its balance sheet, reshuffled its ownership structure and named a new chief executive, while its stock price fell to under $3 during the quarter from $10-plus at the end of 2023.
NYCB (NYCB) is currently expected to report a loss of 26 cents a share on revenue of $777 million when the Hicksville, N.Y.-based lender updates Wall Street with its first-quarter results on April 24.
Back on Jan. 31 just prior to reporting an unexpected fourth-quarter loss, analysts had projected earnings of 16 cents a share for NYCB, according to FactSet data.
Citi analyst Ben Gerlinger said the bank has been facing a drop in deposits after a run of negative headlines during the quarter, so it's turned to managing so-called brokered deposits from third-parties, which are more expensive to banks to keep.
"We believe NYCB ended the quarter with fairly sizable negative mix shift towards broker deposits to replace runoff of lower cost private bank deposits - which will further pressure net interest margin trends," Gerlinger said Wednesday(April 10) in a research note.
He reiterated a neutral rating on the bank and cut his estimate for the bank to a loss of 56 cents a share from his earlier estimate for a loss of 18 cents a share.
The bank's prospects dimmed considerably along with its stock price on Jan. 31 when it reported a fourth-quarter loss of 36 cents a share, compared to the analyst expectation for a profit of 27 cents a share, due to costs of two stressed commercial real estate loans and increased capital requirements.
About a month later on Feb. 29, the bank's stock again fell sharply after it disclosed material weakness related to its loan review.
The stock fell in early March on a report that the bank was seeking capital through a potential stock offering, but then moved up sharply as former Treasury Secretary Steven Mnuchin led a $1 billion investment in NYCB.
At that time, the bank also named Joseph Otting, former comptroller of the currency, as its new CEO.
Trouble with NYCB's rent-regulated apartment loans situation also prompted S&P to issue a negative outlook on five U.S. regional banks due to higher office vacancies as well as an increasing number of loan maturities on the horizon.
During all the drama, Wall Street's expectations for NYCB's first-quarter performance fell sharply.
The first-quarter estimate for the bank fell to 12 cents a share on Feb. 29, moved sharply lower to a loss of 22 cents a share as of March 28 and then settled at the most recent projection for a loss of 26 cents a share on April 11.
In the previous quarter, NY Community Bancorp hiked its loan-loss provision by 790% to $552 million more than any other regional bank, preparation for a potential increase in stressed loans.
Last year, NYCB, which operates under the name Flagstar Bank in several states, picked up some of the leftovers from the failed Signature Bank.
The stock has fallen 71% in the year to date, while the S&P 500 SPX has gained 6%.
Also read: NYCB sells consumer loans valued at $899 million in latest move to bolster finances
Also read: NYCB's capital infusion and new chief executive draw praise, but risks remain
-Steve Gelsi
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(END) Dow Jones Newswires
April 17, 2024 09:21 ET (13:21 GMT)
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