New York Community Bancorp Stock: Buy, Sell or Hold?

shares New York Community Bancorp (NYSE: NYCB) We lost about two-thirds of their value last year. Meanwhile, the average bank stock is SPDR S&P Bank ETF As an industry indicator, it is up over 40% in the same time period. This is not a suitable stock for most investors. But that doesn’t mean all investors want to avoid it.

A look at today’s buying, selling and holding discussions for New York Community Bancorp shares.

A little about New York Community Bancorp

In late 2022, New York Community Bancorp acquired Flagstar Bank, seeking to become a larger bank. Later A brief banking crisis It took a hit in early 2023, but New York Community Bancorp has remained largely unscathed by the industry turmoil. But management, still looking to expand its business, saw potential opportunity in the crisis. He bought parts of Signature Bank, one of the banks that failed during the bank runs.

Image source: Getty Images.

That’s when the problem started. New York Community Bancorp was not prepared for the rapid growth in its business. bigger banks is subject to greater regulatory review, and New York Community Bancorp’s internal controls were not ready for the added requirements and additional scrutiny. The sign of this fact came rather quickly when the company announced that some of its large loans were in trouble. To shore up its balance sheet, the company has cut its dividend twice and it currently stands at just $0.01 per share per quarter.

But this was not enough. New York Community Bancorp had to seek outside help. This came in the form of a $1 billion bailout from a private investor group. While this is a sign of turnaround potential here, it still doesn’t bode well considering the hole the company has dug for itself. This explains why New York Community Bancorp has also fundamentally revamped its management team. Simply put, New York Community Bancorp is a troubled financial institution in an industry full of competitors that are performing at much higher levels.

Lawsuit to sell New York Community Bancorp

For most investors, the decision to sell (or the choice not to buy in the first place) should be simple. Why invest in a struggling bank when you can own better-positioned banks? Even if you like it return stories, there are better options out there (e.g. Toronto-Dominion Bank).

The biggest warning sign here is that New York Community Bancorp’s problems are largely self-inflicted. Of course, there is a new management team, but it needs to clean up the mess left behind by the previous team. Only after this is taken care of can the bank start thinking about growth again. If you’re a risk-averse investor, this isn’t a particularly interesting story.

Lawsuit to hold New York Community Bancorp

Holding call is quite difficult. After the dividend cut, the yield is as little as 0.4%. This compares with the broader banking sector’s return of 2.5 per cent. You don’t get paid very well to wait for better days. And New York Community Bancorp won’t be in line with its peers in terms of profitability until at least the end of 2026, according to its new management team.

In other words, it looks like New York Community Bancorp may have run out of money for a while. If you have paper losses in stock, you may want to: capture the loss to offset the gains elsewhere in your portfolio. But if you don’t mind sitting around or can’t afford to take a loss, the bank seems to be moving in the right direction. Be aware that you may have to hold on to it for a few years before breaking even.

NYCB data Y Charts

Purchase of New York Community Bancorp shares

Still, if you like a good turnaround story, there may be a reason to buy New York Community Bancorp. The $1 billion cash infusion would likely give the troubled financial institution the boost it needs to get out of its hole. The process will not be quick or easy. But at this point, it seems unlikely that New York Community Bancorp will fail any time soon.

And if things turn out well, there’s significant upside potential, given the massive stock price declines shareholders have experienced. In some ways, much of the risk here is priced into the stock. There are much better bank stories to invest in, but if you don’t mind living on the edge (and waiting a long time), New York Community Bancorp may be the turnaround stock for you.

It won’t be worth it for most investors

There are investors who like to find cigar butts; these are essentially companies that have been battered but still have some life left in them. This is the current situation with New York Community Bancorp. These types of return investments are high risk and not the type of thing most investors want to sign up for. As a result, there are better options in the banking industry today, even for investors who like return stocks.

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Reuben Gregg Brewing Company They have positions at Toronto-Dominion Bank. The Motley Fool has no position in any stocks mentioned. The Motley Fool has a feature disclosure policy.