NYCB - New York Community Bancorp raised to Buy at DA Davidson on Signature deal

2023-03-21 08:57:39 ET

D.A. Davidson analyst Peter Winter upgraded New York Community Bancorp ( NYSE: NYCB ) to Buy on Tuesday as the bank's acquisition of certain Signature Bank ( NASDAQ: SBNY ) assets and liabilities will accelerate its transformation to a more commercial bank-like structure and is expected to significantly add to its EPS by 2024.

NYCB shares rose 6.8% i n Tuesday premarket trading as other regional banks also rebound as fears over bank volatility ease. The SPDR S&P Regional Bank ETF ( KRE ) gained 4.7% .

The acquisition will lower New York Community Bancorp's ( NYCB ) loan-to-deposit ratio to under 100% and increase commercial and industrial loans, while reducing its concentration in multifamily housing loans, the analyst said in a note to clients.

The bank is also acquiring ~$34B in deposits including ~40% of noninterest bearing deposits. That brings NYCB's non-interest bearing deposits to ~28% of total deposits, up from 21%.

The deal is expected to increase EPS by 20%+ in 2024 and immediately add to tangible book value by 15%+.

"Although there is a risk of outflow of deposits from Signature, NYCB made a valid point that Signature has already realized a significant outflow of deposits; which were $89B at 12/31 and NYCB is not taking any crypto or venture capital related deposits; which have been very volatile," Winter wrote.

The analyst's Buy rating is more bullish than the SA Quant rating of Hold and aligns with the average SA Author's rating and average Wall Streeet rating .

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