It wasn’t even a year ago when regional financial institution New York Community Bancorp (NYSE:NYCB) bought up Signature Bank’s assets. Astoundingly, New York Community Bancorp is in a completely different position today as it may be at risk of failure.
On the other hand, NYCB stock has been cut in half, and there may be a comeback opportunity here. Is it possible that all of the bad news concerning New York Community Bancorp has already been factored into the share price?
Additionally, if you put your ear to the ground, then you might catch wind of recent insider buying activity. The risk is great and the future is uncertain, but perhaps New York Community Bancorp has a turnaround tale that tough-skinned investors can take to the bank.
Dividend doom and write-down wreckage
Jan. 31, 2023, will be a “day that lives in infamy” (to borrow from a famous speech) for New York Community Bancorp. You might not know it from the company’s fourth-quarter and full-year 2023 financial press release though.
In that press release, New York Community Bancorp shouted about its “DECISIVE ACTIONS” and “SIGNIFICANT ACHIEVEMENTS.” Evidently, just about anything can be spun with a positive slant through the use of strong adjectives and all capital letters.
Zeroing in on the financial results, New York Community Bancorp reported full-year 2023 net income available to common stockholders of $576 million, down moderately from $603 million in 2022. However, that’s not what shocked Wall Street.
In the fourth quarter, New York Community Bancorp wrote down some bad loans, labeled in the press release as provisions for “credit losses” and “charge-offs.” Consequently, the regional bank ended up posting a surprise net loss in Q4 2023 to the tune of $193 million; in contrast, it had recorded net income of $266 million in the prior quarter.
If that wasn’t bad enough, New York Community Bancorp slashed its per-share quarterly dividend from 17 cents to just 5 cents.
However, CEO Thomas Cangemi assured shareholders, “We recognize the importance and impact of the dividend reduction on all of our stockholders, and it was not made lightly.”
Of course, the chief executive’s statement didn’t quell investors’ consternation. NYCB stock lost more than 40% of its value on that dreadful day as chatter of another bout of regional-banking contagion circulated. Then, effectively adding insult to injury, Moody’s cut New York Community Bancorp’s credit rating to “junk” status.
Here’s the billion-dollar question. Value investors are supposed to buy when there’s blood in the streets, right? This old principle is truly being put to the test with NYCB stock in 2024.
For what it’s worth, New York Community Bancorp named Alessandro DiNello as its executive chairman, and he promised to strengthen “every aspect of the company” to build a “fortress balance sheet.” Moreover, DiNello expressed a willingness to shrink New York Community Bancorp’s balance sheet by selling loans.
New York Community Bancorp also has a bullish analyst in its corner if you can believe it. Piper Sandler’s Mark Fitzgibbon reiterated his Buy rating on NYCB stock.
In fact, his firm assigned an $8 price target on the shares, writing, “[W]e view it as quite inexpensive, and we think the risk/reward from here is very attractive.”
It’s one thing to place a Buy rating on a stock; it’s another thing entirely to actually buy it. Thus, it’s a notable act of confidence for New York Community Bancorp’s insiders to purchase shares of their company amid the apparent turmoil. Here’s the reported insider buying activity, courtesy of Barron’s:
- DiNello: 50,000 shares, valued at $209,480
- Cangemi: 11,310 shares, valued at $49,900
- Director Peter Schoels: 100,000 shares, valued at $414,750
- Lee M. Smith, senior executive vice president and president of mortgage: 25,000 shares, valued at $101,250
- Reginald E. Davis, senior executive vice president and president of banking: 1,200 shares, valued at $4,920
- Julie Signorille-Browne, senior executive vice president and chief operating officer: 2,000 shares, valued at $9,500
- Director David Treadwell: 15,000 shares, valued at $62,550
- Director Jennifer R. Whip: 5,100 shares, valued at $21,267
I’m sure you get the idea by now. Janney Montgomery Scott analyst Christopher Marinac drew the same conclusion that I did, opining, “Insider buying today is a very positive development. It is exactly what investors have wanted to see: renewed commitment to ‘eat their own cooking.’”
Thus, maybe there really is a blood-in-the-streets moment to be captured with NYCB stock. Just keep in the back of your mind that New York Community Bancorp could, irrespective of the insiders’ apparent confidence, someday join Signature Bank in financial history’s dustbin.
Disclaimer: All investments involve risk. In no way should this article be taken as investment advice or constitute responsibility for investment gains or losses. The information in this report should not be relied upon for investment decisions. All investors must conduct their own due diligence and consult their own investment advisors in making trading decisions.
