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New York Community Bancorp: M&A Rumor Winner

NEW YORK ( TheStreet) -- New York Community Bancorp (NYCB - Get Report) was the sector winner on a mostly down Tuesday for bank stocks, with shares rising 1% to close at $13.97.

The company has been holding discussions to acquire OneWest Bank of Pasadena, Calif., according to a Reuters report that cites three unnamed sources.

OneWest Bank is the former IndyMac Bank, which failed in July 2008 and was then run under FDIC conservatorship until being sold to private equity investors in March 2009.

M&A speculation drove an upgrade of New York Community Bancorp's shares to an "outperform" rating from a "market perform" rating on March 6 by KBW analyst Collyn Gilbert.

In a report, the analyst said "an acquisition for NYCB could prove to be a positive catalyst for the shares," and among several possible targets, Gilbert said "we tend to think OneWest could be the most suitable."

OneWest's mortgage-focused business model is similar to that of the failed AmTrust Bank of Cleveland, which New York Community Bancorp purchased from the Federal Deposit Insurance Corp. in December 2009. In addition to the similarity with AmTrust, Gilbert said OneWest was a likely candidate because of "limited competition among other potential buyers."

New York Community Bancorp had $44.1 billion in total assets as of Dec. 31, while OneWest had $25.9 billion in total assets. A combination of the two banks would be a major transformation for New York Community, bringing it well above the $50 billion size for a "systemically important financial institution," (SIFI) in the eyes of regulators.

New York Community CEO Joseph Ficalora at a conference on March 4 said the company was "actively working toward getting regulatory approval so as to be a SIFI bank -- a bigger bank." He added that "it is our intent to do whatever the necessary work is to get that approval because, in the environment ahead, there will be opportunities to create great value for shareholders by doing, at least in our case, first a large deal and then whatever other deals we need to do."

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