By Rebecca Ungarino
Investors rewarded New York Community Bancorp as management laid out plans to restore the bank to health and disclosed results that were less disastrous than feared on Wednesday.
The Long Island-based lender is trying to turn itself around with new leadership and investor backing. It nearly collapsed this spring because of management missteps and its heavy exposure to a weakened real estate market.
Shares of NYCB traded as high as $3.63 per share on Wednesday morning, reflecting a jump of 37% at the intraday peak. The stock is still down about 70% in a year's time after a dismal fourth-quarter earnings report surprised investors and sent it plummeting in late January.
The rise would mark the largest percentage increase on record if the gains held through Wednesday's close. Driving investors' optimism was a plan management outlined to reach profitability. NYCB said it planned to achieve a return on assets of 1% by the fourth quarter of 2026, based on a long-term strategy that includes diversifying its loan book.
That suggests earnings per share of 65 cents to 75 cents per share, Jefferies analysts led by Casey Haire wrote in a note on Wednesday. "Overall, we believe results are better than worst-case fears," Haire wrote, pointing to factors including deposits showing resilience. Jefferies rates the stock at Hold.
Citi analyst Benjamin Gerlinger wrote that while NYCB is "still quite early" in its turnaround story, he expected shares to rise on Wednesday after the bank reported a favorable shift in its mix of customers and outlined goals to improve its profitability. Gerlinger holds a Neutral rating on the stock, which he also deems high risk.
"Since taking on the CEO role, my focus has been on transforming New York Community Bank into a high-performing, well-diversified regional bank," Joseph Otting, the bank's chief executive, said in a statement. "While this year will be a transitional year for the company, we have a clear path to profitability over the following two years."
Otting, a former bank regulator, has been CEO since April 1 as the third person to hold the post in just a few months. Otting took over from Alessandro DiNello, who had succeeded Thomas Cangemi this year.
The bank is operating with new investors in addition to new leadership.
A group of financiers by Liberty Strategic Capital, former Treasury Secretary Steven Mnuchin's private-equity firm, said in March that it would invested some $1 billion. Liberty invested $450 million, Hudson Bay Capital Management put in $250 million, and Reverence Capital Partners invested $200 million as part of that deal, according to NYCB.
NYCB, which is the parent of the regional Flagstar Bank and had acquired assets of failed lender Signature Bank last year during the regional banking crisis, reported a quarterly net loss of $335 million. That amounted to a loss of 45 cents a share, while the consensus call among analysts polled by FactSet was for a per-share loss of 26 cents.
Revenue of $633 million also missed expectations, coming in lower than the $777 million that analysts had forecast. That was a reversal from the first quarter of 2023, when the bank reported net income of $2 billion on total revenue of $2.65 billion.
Still, investors are betting on targets the company set out on Wednesday. The question now is whether it can win back trust and execute on its plans after months of chaos.
Write to Rebecca Ungarino at rebecca.ungarino@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
May 01, 2024 13:48 ET (17:48 GMT)
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