On Thursday, New York Community Bancorp (NYSE:NYCB) experienced a shift in market perspective as DA Davidson adjusted its rating on the company's stock. The firm downgraded NYCB from Buy to Neutral and revised its price target to $5.00 from the previous $8.50. This reassessment by the firm comes in the wake of recent developments that could potentially impact the bank's financial stability.
The downgrade was influenced by a combination of factors, including a recent update from the bank that indicated a significant increase in total deposits to $83 billion as of February 5, 2024, compared to the end of the previous year. Additionally, the bank reported a total liquidity of $37.3 billion, which surpasses the amount of uninsured deposits held, boasting a coverage ratio of 163%.
Despite these seemingly positive indicators, concerns have been raised due to the bank's downgrade to junk status by Moody's (NYSE:MCO) and apprehensions regarding its commercial real estate (CRE) exposure. DA Davidson suggests that these issues could lead to potential deposit outflows in the future. The analysis also acknowledges that while NYCB has expressed a willingness to sell non-strategic assets to build capital, such measures may not adequately address the risk of deposit withdrawals.
The firm notes that the current trading patterns of NYCB's stock do not reflect the bank's fundamentals, as evidenced by a price to tangible book value (P/TBV) ratio of 0.45X. This observation has contributed to the decision to lower the price target and adjust the stock's rating. As the market processes these updates, NYCB's future performance remains under close scrutiny by investors and analysts alike.
InvestingPro Insights
In light of DA Davidson's recent rating downgrade for New York Community Bancorp (NASDAQ:CTBI) (NYSE:NYCB), investors may find the following insights from InvestingPro valuable for a deeper understanding of the company's current position. Despite the downgrade, NYCB is trading at a low Price / Book multiple of 0.3 as of the last twelve months ending Q4 2023, suggesting that the stock may be undervalued relative to its book value.
Additionally, the bank boasts a high shareholder yield, which is a positive sign for investors looking for returns through dividends and buybacks. This is particularly relevant as NYCB has maintained dividend payments for an impressive 31 consecutive years. The current dividend yield stands at 4.46% as of the latest data, which is a compelling figure for income-seeking investors.
However, it's important to note that the bank's stock has experienced significant price volatility, with a 1-month price total return of -57.7% and a 3-month price total return of -52.79% as of the latest data. This volatility is reflected in the stock's recent performance, with a substantial hit over the last week, month, and six months. Investors should consider this high price volatility when evaluating the risk associated with an investment in NYCB.
For those seeking further insights, there are 15 additional InvestingPro Tips available for NYCB at https://www.investing.com/pro/NYCB. Use coupon code SFY24 to get an additional 10% off a 2-year InvestingPro+ subscription, or SFY241 to get an additional 10% off a 1-year InvestingPro+ subscription.
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