Are we looking at another Silicon Valley Bank in the making? New York Community Bancorp (NYSE:NYCB) has taken it on the chin in the last several days, with share prices plunging and its credit rating now synonymous with financial disaster. The bank stock is frantically trying to reassure investors, who are racing for the door, and it’s not going so well. Indeed, New York Community Bancorp stock is down another 13% in Wednesday morning’s trading despite its best efforts.
So, how do you reassure account holders and shareholders that your bank isn’t actually insolvent despite a massive drop in share prices and the fact that Moody’s declared your credit “junk”? Apparently, you put out a press release.
To its credit, the press release offered some numbers that at least made sense: total deposits are up since the end of 2023. And, for those concerned that only about two-thirds of New York Community’s deposits are insured, New York Community showed that it had enough cash on hand to cover those deposits itself, with a total liquidity of $37.3 billion.
Commercial Real Estate Problems Spreading
One of the biggest problems that NYCB has is its exposure to commercial real estate. While businesses have been frantically issuing return-to-office edicts, they’re discovering that making them stick isn’t that easy. A “Dilbert” strip summed it up well; the Pointy-Haired Boss polls his underlings to see who wants to return to the office. The answer is “no one.” The Pointy-Haired Boss then declares, “…it was a mistake to let them taste happiness.”
That, along with a pullback in business in general, as exhibited by huge piles of layoffs seen in the last few weeks, makes those big downtown campuses worth a lot less than they were. And that’s hurting places like New York Community Bancorp to the point we see today.
Is New York Community Bancorp a Good Stock?
Turning to Wall Street, analysts have a Hold consensus rating on NYCB stock based on four Buys, eight Holds, and one Sell assigned in the past three months, as indicated by the graphic below. After a 61.07% drop in its share price over the past year, the average NYCB price target of $8.33 per share implies 123.32% upside potential.
