New York Community Bancorp has been downgraded to a neutral rating from a buy rating by D.A. Davidson. The downgrade was influenced by the stock’s disconnect from its underlying fundamentals, as noted by the firm’s analyst.
D.A. Davidson’s Peter Winter has adjusted the price target for New York Community Bancorp (NYCB) to $5 per share, down from the previous target of $8.50. Several recent developments at the bank, including a rise in deposits and the search for a new chief risk officer, have contributed to this adjustment.
As a result of the downgrade, New York Community Bancorp’s stock experienced a 7% decline in morning trading, reaching $4.16 per share.
While Winter acknowledged the impressive increase in deposits reported by the bank, he expressed concern about potential deposit outflows. This concern was further amplified by Moody’s Investors Service downgrading the bank’s debt to junk status on Wednesday.
The bank’s stock price has significantly dropped following the release of its fourth-quarter results last week.
Winter highlighted the potential impact of the Moody’s downgrade and a series of negative headlines on deposits, stating that there is a possibility of deposits and bankers fleeing from the institution.
Notably, Winter observed that board member Alessandro (Sandro) DiNello assumed the role of executive chair in Wednesday’s announcement, responding to most of the analyst’s inquiries during the conference call instead of CEO Tom Cangemi.
Winter outlined DiNello’s key priority to reduce the bank’s commercial real estate concentration, with multifamily accounting for 44% of loans and commercial real estate totaling 12%. If necessary, DiNello is willing to sell nonstrategic assets to facilitate this diversification and strengthen the bank’s capital. Winter emphasized that transforming the balance sheet will require more time than initially anticipated based on the fourth-quarter earnings call.
See Market Extra: New York Community Bancorp Considers Selling Rent-Regulated Commercial Real Estate After Surprise Quarterly Loss