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TheStreet Open House

New York Community Bancorp: Financial Loser

NEW YORK (TheStreet) -- New York Community Bancorp (NYB) was the loser among the largest U.S. financial names on Monday, with shares declining over 3% to close at $12.39.

The broad indexes all declined as investors prepared for earnings season, set to begin after the market close, with Alcoa (AA) expected by analysts polled by Thomson Reuters to report second-quarter earnings of five cents a share, declining from 10 cents a share the previous quarter and 32 cents a year earlier.

For large U.S. bank holding companies, earnings season begins Friday at 7AM EST when JPMorgan Chase (JPM) reports its second-quarter results, followed by Wells Fargo (WFC), which is scheduled to report at 8AM.

Investors continued to worry over events in Europe, as the yields on Spanish 10-year bonds rose by 11 basis points to 6.98%, as Eurozone finance ministers set to meet in Brussels to discuss the rescue package for Spain's banks and a unified European bank regulator.

The KBW Bank Index (I:BKX) declined 1% to close at 44.95, with 17 of the 24 index components showing declines for the session.

New York Community Bancorp's shares have now declined 4% year-to-date, after declining 30% during 2011.

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The shares for 1.8 times their reported March 31 tangible book value of $7.05, and for 12 times the consensus 2013 earnings estimate of $1.05 a share, among analysts polled by Thomson Reuters. The consensus 2012 EPS estimate is also $1.05.

Based on a 25-cent quarterly payout, the shares have a dividend yield of 8.07%.

New York Community Bancorp is set to report its second-quarter results on July 25, with analysts expecting operating earnings of 27 cents a share, matching the results the previous quarter and a year earlier.

Credit Suisse analyst Moshe Orenbuch on Monday lowered his rating for New York Community Bancorp from "Outperform" to "Neutral," while lowering his price target for the shares to $14 from $17, while lowering his 2012 EPS estimate by 10 cents to $1.20 and his 2013 estimate by 20 cents to $1.35, saying "a Neutral rating is warranted as NYB is a strong niche player in the multi-family lending space and we expect to see NYB continue to generate loan and balance sheet growth, albeit at a slower pace than our previous forecasts."

Orenbuch foresees "pressures from the company's declining [net interest margin] due to expectations for continued low rates, competitive pressures in multifamily lending pricing and over time, reduced contributions from lower levels of refinancings and prepayment penalty income."

Over the past several years, some analysts have repeatedly warned that New York Community Bancorp's dividend could be cut, since the company pays out most of its earnings. The company has maintained the 25-cent dividend payout for 33 consecutive quarters, and according to Thomson Reuters Bank Insight has managed to achieve relatively strong operating returns on average assets ranging from 1.13% to 1.21% over the past five quarters.

Orenbuch said "while we remain comfortable with NYB's credit and capital position, we think that the elevated dividend payout ratio could come under scrutiny by regulators as NYB will be subject to annual stress tests."

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

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

>Contact by Email.

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.

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