This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

'Meaningful Upside' for Astoria Financial in 2014, Says KBW

NEW YORK ( TheStreet) -- Astoria Financial (AF - Get Report) has been growing its multifamily and commercial real estate loan portfolio at a strong pace, and KBW analyst Brian Kleinhanzl expects the company to "benefit from higher long-term rates in multiple ways."

The analyst on Wednesday upgraded Astoria to an "outperform" rating from "market perform," while leaving his 2014 earnings estimate for the bank unchanged at 70 cents a share, but raising his 2015 EPS estimate to $1.00 from $0.85.

Astoria has been going through a multi-year repositioning of its balance sheet, as the company prepays wholesale borrowings and focuses more on building its multifamily and commercial mortgage business, while de-emphasizing its traditional focus on one-to-four family mortgage lending.

The company had $16.1 billion in total assets as of Sept. 30, down 8% from a year earlier, mainly reflecting a 19% decline in one-to-four family mortgage loans, to $8.499 billion.  But that was partially offset by a 32% increase in more profitable multifamily and commercial real estate loans, to $3.829 billion, as of Sept. 30.

Astoria's net interest margin -- the spread between the average yield on loans and investments and the average cost for deposits and borrowings -- widened to 2.28% in the third quarter, from 2.22% the previous quarter and 2.09% a year earlier.

The margin, along with Astoria's overall profitability, was helped by  an 8% year-over-year increase in NOW and demand deposits to $2.2013 billion as of Sept. 30., with an average cost of just 5 basis points.

Astoria's return on average assets for the third quarter was 0.42%, improving from 0.31% a year earlier, while its return on tangible common equity improved to 5.20% from 4.84%. 

The improved returns are still not impressive, and "2014 will be another transitional year for Astoria's balance sheet," according to Kleinhanzl, however the analyst also believes that as Astoria moves past its balance sheet restructuing, "the company's stock valuation [will] improve as investors get a clearer picture of the true earnings power of Astoria post balance sheet repositioning."

Kleinhanzl raised his price target for Astoria to $17 from $13, "largely on improved expected returns in the forward years."

Astoria's shares closed at $13.84, returning 50% during 2013, assuming the reinvestment of dividends.  With a quarterly payout of 4 cents, the shares have a dividend yield of 1.16%.

The shares trade for 1.2 times their reported Sept. 30 tangible book value of $11.59, and for 17.5 times the consensus 2015 EPS estimate of 79 cents.  The consensus 2014 EPS estimate is 64 cents.

It will be fascinating to see whether or not the consensus 2015 EPS estimate rises significantly this year against Kleinhanzl's 2015 EPS estimate of $1.00.

The following chart shows Astoria's performance during 2013 against the KBW Bank Index (I:BKX) and the S&P 500 (^GSPC):

AF Chart AF data by YCharts

Interested in more on Astoria Financial? See TheStreet Ratings' report card for this stock.

-- 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 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.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AF $14.63 -0.41%
AAPL $93.24 -0.41%
FB $117.81 -0.21%
GOOG $701.43 0.82%
TSLA $211.53 -4.96%


Chart of I:DJI
DOW 17,660.71 +9.45 0.05%
S&P 500 2,050.63 -0.49 -0.02%
NASDAQ 4,717.0940 -8.5450 -0.18%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs