Bank of New York Mellon: Financial Loser

Shares of New York Community Bancorp (NYB) pulled back over 2% to close at $13.33.

The shares have now returned 10% year to date, following a 30% decline during 2010.

The company's strong earnings performance continued, with an expected first-quarter rise in mortgage revenue supporting a 1.13% return on average assets, compared to 1.12% the previous quarter, and 1.15% a year earlier. The return on average tangible equity was a very solid 15.90% during the first quarter, compared to 15.80% in the fourth quarter, and 16.21%, in the first quarter of 2011.

Over the past several years, investor fears over New York Community Bancorp have centered on the company's ability to continue paying its very generous quarterly dividend of 25 cents a share, which translated to a yield of 7.50%% at Wednesday's close.

The company has maintained the dividend for 33 consecutive quarters, right through the credit crisis, and first-quarter earnings of 27 cents a share -- beating the consensus EPS estimate of 26 cents -- more than covered the dividend, but Sandler O'Neill analyst Mark Fitzgibbon emphasized the "comparatively high 93% payout ratio," saying that although his firm continued "to view the dividend as attractive, we also continue to be concerned that over time banking regulators will pressure institutions with higher payout ratios to lower their dividends."

Of course, with so much regulatory action over the past several years, and the banking industry clearly on the upswing, one might wonder why regulators -- if they really were bent on a dividend cut by New York Community -- wouldn't have pushed for it some time ago.

Fitzgibbon rates New York Community Bancorp a "Hold," with a 12-month price target of $14, estimating the company will earn $1.02 a share for all of 2012, followed by 2013 EPS of $1.05.

Bank of America Merrill Lynch analyst Kenneth Bruce rates New York Community "Underperform," with an $11 price objective, and said the company's "Strong mortgage banking income comes as no surprise, though it appears NYB sold more loans than originated, putting it squarely on a treadmill."

Bruce estimates New York Community will earn 92 cents a share during 2012, followed by 2013 EPS of just 82 cents.

KBW analyst Fred Cannon has the opposite view of New York Community, rating the stock "Outperform," with a $15 price target, and estimating the company will earn $1.06 during 2012, followed by 2013 EPS of $1.13.

Cannon said on Wednesday that NYB's first-quarter "results were driven by strong mortgage banking and better loan growth offset by slightly higher provision versus our expectations," and that "overall, we view this was an in-line quarter and the focus will likely be on margin pressure and the sustainability of mortgage banking results."

The shares trade for 1.9 times their reported March 31 tangible book value of $7.05 and 12 times the consensus 2013 EPS estimate of $1.10. The consensus 2012 EPS estimate is $1.05.

Interested in more on New York Community Bancorp? See TheStreet Ratings' report card for this stock.

RELATED STORIES:

Bank of America Needs Stellar 1Q for Share Price Pop

Goldman CFO, JPMorgan's Dimon Differ on Euro Fix

Huntington Bancshares Profit Rises 21%

PNC Profit Fueled by 18% Jump in Mortgage Revenue

New York Community Earnings Beat With Housing Help

Bank of New York Meets Profit Forecast

-- Written by Philip van Doorn in Jupiter, Fla.

To contact the writer, click here: Philip van Doorn.

To follow the writer on Twitter, go to http://twitter.com/PhilipvanDoorn.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

« First ‹ Previous 1 2