It has been about a month since the last earnings report for New York Community Bancorp (NYCB). Shares have added about 8.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is New York Community Bancorp due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
New York Community Q3 Earnings & Revenue Lag
New York Community’s third-quarter earnings per share (non-GAAP) of 31 cents missed the Zacks Consensus Estimate of 32 cents. The bottom line matched the prior-year number.
New York Community’s results were hurt by higher provision for credit losses and a rise in expenses. However, higher revenues, driven by an increase in net interest income (NII) and non-interest income, acted as a tailwind. The company also witnessed growth in total deposits and loans and leases held for investment.
After considering merger-related expenses, net income available to common shareholders was $144 million, up 3% year over year.
Revenues Increase, Expenses Up
Total revenues were $343 million, up 3% year over year. The top line, however, lagged the Zacks Consensus Estimate of $355 million.
NII grew 3% to $326 million. The rise mainly resulted from improvement in average loan balances and higher rates.
The NIM of 2.22% was down 22 basis points (bps). This was mainly due to liability-sensitive balance sheet.
Non-interest income was $17 million, rising 13%.
Total non-interest expenses of $136 million increased 1%. Excluding merger-related expenses, total operating expenses were $132 million, up 2%.
The efficiency ratio was 38.57%, down from 38.84% in the year-ago quarter. A decline in efficiency ratio indicates improved profitability.
Loans & Deposit Balance Climb
As of Sep 30, 2022, total deposits increased 1.2% sequentially to $41.7 billion. The increase was mainly attributable to the ongoing growth in the Banking-as-a-Service (BaaS) business and a rise in loan-related deposits.
Total loans and leases held for investment rose 1% to $49 billion. Loan rise continues to be driven by growth in both the multi-family and specialty finance portfolios.
In the third quarter, total loan originations were $3.8 billion, down 29% sequentially. This was due to seasonality. During the quarter, both multi-family originations and specialty finance loan originations declined.
Credit Quality: Mixed Bag
The company recorded net charge-offs of zero in the third quarter, on par with the prior-year quarter.
Provision for credit losses was $2 million in the reported quarter against recovery of credit losses of $1 million in the prior year quarter. In addition, non-performing assets jumped 37% year over year to $50 million.
Profitability & Capital Ratios Solid
As of Sep 30, 2022, return on average assets and return on average common stockholders’ equity were 0.96% and 9.01%, compared with 1.04% and 8.69%, respectively, in the year-ago quarter.
As of Sep 30, 2022, common equity tier 1 ratio was 9.24%, down from 9.92% as of Sep 30, 2021. The total risk-based capital ratio was 12.06%, falling from 13.11% in the year-ago quarter. The leverage capital ratio was 8.06%, down from 8.50% in the year-ago quarter.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -10.48% due to these changes.
At this time, New York Community Bancorp has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, New York Community Bancorp has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
New York Community Bancorp belongs to the Zacks Financial - Savings and Loan industry. Another stock from the same industry, Citizens Financial Group (CFG), has gained 3.8% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.
Citizens Financial Group reported revenues of $2.18 billion in the last reported quarter, representing a year-over-year change of +31.2%. EPS of $1.30 for the same period compares with $1.22 a year ago.
For the current quarter, Citizens Financial Group is expected to post earnings of $1.31 per share, indicating a change of +4% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.1% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Citizens Financial Group. Also, the stock has a VGM Score of B.
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