An Attractive NYSE-Listed Mid-Cap Bank in the Buy Zone – NYCB

New York Community Bancorp, Inc.

NYCB Details

New York Community Bancorp, Inc. (NYSE: NYCB) serves as the bank holding company for New York Community Bank, which operates in Metro New York, New Jersey, Ohio, Florida, and Arizona. The bank accepts a variety of deposit products, including interest-bearing checking and money market accounts, savings, non-interest-bearing accounts, individual retirement accounts, and certificates of deposit. 

Latest News:

• Launched Spanish Website: TransPerfect, the world's largest language and technology solutions provider for worldwide business, announced the Spanish debut of the NYCB and My Banking Direct websites on March 18, 2022. The new sites were built with TransPerfect's GlobalLink OneLink solution, which simplifies the process of designing, launching, and managing multilingual websites, to satisfy the growing service needs of the bank's Spanish-speaking customer base.

FY21 Results:

• Improvement in Net Interest Income: The company reported a 17.18% increase in net interest income to USD 1.29 billion in FY21 (ended December 31, 2021) from USD 1.10 billion in FY20.
• Growth in Net Income: The bank reported an increase in net income to USD 596 million in FY21 from USD 511 million in FY20.
• Decline in Non-Performing Loans: NYCB reported a decrease in total non-performing loans to USD 33 million in FY21 vs. USD 38 million in FY20.
• Robust NIM: NYCB's net interest margin (NIM) improved by 23 basis points (bps) to 2.47% for the twelve months ended December 31, 2021, from 2.24% for the twelve months ended December 31, 2020.

Key Risks:

• Macro Headwinds: The current increase in inflation reduces purchasing power, allowing central banks to boost interest rates and drain liquidity. The dwindling liquidity will pressure borrowing costs, threatening bank profitability in short to medium term. Furthermore, a lower Tier 1 Risk-Adjusted Capital ratio compared to the industry mean is a setback for the bank unless it demonstrates a reversal in its performance. 
  

Valuation Methodology: Price/Earnings Per Share Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

NYCB's stock price has been volatile throughout the year, fallen 13.55% in the past six months and is currently leaning towards the lower end of its 52-week range of USD 10.73 to USD 14.33. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 13.42.

Considering the significant correction in the stock price, strong fundaments, associated risks, and current valuation, we recommend a "Buy" rating on the stock at the closing price of USD 10.97, up 1.29%, as of March 25, 2022.

Three-Year Technical Price Chart (March 25, 2022). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary:

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors' appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above.

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