When we last left New York Community Bancorp (NYCB) , the troubled financial services company's shares were surging.
The regional bank's stock has been on a wild ride over the last few days, tumbling more than 40% in one session and jumping as much as 16% the following day.
But the good times didn't last long and and shares were down again on March 8, sliding 7% to $3.40 in late afternoon trading.
The turmoil began with a report in The Wall Street Journal that said the company was looking to raise new capital to shore up its balance sheet.
Earlier, the New York Community Bancorp had stunned investors on Jan. 31 by reporting an unexpected fourth-quarter loss, causing the stock to tumble to its lowest level since 1997.
Enter former Treasury Secretary Steven Mnuchin and his firm, Liberty Strategic Capital, which is leading a $1 billion rescue of the company.
With the new capital plan, Mnuchin will join the NYCB board along with Joseph Otting, who was named the new CEO.
Otting, a former U.S. comptroller of the currency, has longtime ties to Mnuchin, as both men served in the Donald Trump Administration.
Analyst: 'heavy lifting ahead'
During a call with analysts on March 7, Otting said the bank is seeing interest from non-bank bidders for some of its loans and will outline a new business plan next month, Reuters reported, while disclosing deposits fell 7%.
Otting and Non-Executive Chair Alessandro DiNello, who had been named the bank’s CEO on Feb. 29, told analysts that they would soon unveil a new business plan and had closely scrutinized the bank's books, and provided insight on deposit flows.
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“I've spent a fair amount of time getting to know the organization from afar and then a significant amount of time conducting due diligence on the portfolio and the balance sheet,” Otting said, noting that NYCB had a “strong liquidity position.”
Despite Otting's reassurances, analysts were still taking a cautious stance with the bank.
Bank of America cut its price target for NYCB to $4.25 from $5 while keeping a neutral rating.
In a research note entitled "Heavy lifting ahead," the bank's analysts said that "significant uncertainty stemming from the need for additional credit reserves, potential for an external capital raise, abrupt management changes pose downside risk to the stock."
"While we see potential downside risks to our forecast, we believe that current valuation is already pricing-in a range of negative outcomes, keeping us at a neutral rating," the firm said.
Bank of America said that the capital infusion and the experience of the incoming investor base should afford some time to engineer "a thoughtful turnaround."
"However, there is heavy lifting ahead and the shape, timing and the probability of success of any potential turnaround remains an unknown," the firm said.
Wedbush analysts kept their underperform rating and $3 price target for the bank's shares.
"Our takeaways from the deal remain largely the same: this is a very dilutive, but necessary deal for NYCB in order to shore up its capital base and reassure depositors," the firm said.
Analyst calls for 'cautious approach'
Despite the recent credit downgrades from Fitch and Moody's, Wedbush said NYCB maintained that it was able to obtain waivers to maintain custodial deposit levels.
The firm said its underperform rating is based on the bank's high exposure to NYC rent-regulated multifamily loans, which the firm believes are under stress and represent 22% of NYCB's total loans.
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Compass Point also cut its price target on NYCB to $4.50 from $5, while keeping a neutral rating.
The firm cited the significant increase in diluted shares resulting from NYCB's capital raise as a primary factor for the adjustment, according to Investing.com.
Compass Point also pointed out changes to the forecasted core earnings per share for fiscal years 2024 and 2025, adjusting them to 19 cents and 40 cents, respectively, from the earlier estimates of 42 cents and 80 cents.
Despite the lower price target, the firm acknowledged the potential for upside but also recognizes increased risks to their target and core earnings-per-share estimates.
Compass Point suggested a cautious approach in the near term, considering the uncertainties and challenges that NYCB faces
RBC Capital lowered the firm's price target on NYCB to $5 from $7 and kept a sector perform rating on the shares after the bank announced an equity raise and reduced its quarterly dividend to 1 cent per share from 5 cents.
The equity raise "meaningfully" improves the bank's capital ratios and confidence in the company, and also adds the ability to increase loan loss reserves, which is likely to be seen with first quarter earnings, the firm told investors.
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