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New York Community Bancorp: A High-Yield Value Trap

Published Wed, 24 Jan 2018 13:26:27 -0500 on Seeking Alpha

New York Community Bancorp (NYCB) offers a dividend yield of 4.88%, the highest of any of the 74 banks currently in the KBW Banking and Regional Banking Indexes, and trades at a significant price to tangible book value (P/TBV) discount to the group. Against that backdrop, the stock attracts considerable attention as a high-yield value play.
Moreover, recent corporate tax cuts reduce risks the bank will be forced to reduce its dividend while the rising probability for legislative changes to rules governing systemically important financial institutions (SIFI) could aid the bank in resuming loan growth this year.
However, New York Community’s hefty exposure to multifamily residential home lending and limited exposure to commercial and industrial (C&I) loans limits its leverage to rising short term interest rates. Meanwhile, the bank’s high loan-to-deposit ratio and regional competition for deposits in the northeast US mean it’s likely to see a higher deposit beta than most regionals in 2018.
New York Community is a high-yield value trap, likely to lag the broader market and its regional banking peers in 2018 just as it did last year.
Focus on Multifamily in New York State As explained in “When Rates Rise, Buy Regional Banks But Be Selective” the key to separating the haves from the have-nots in the regional banking industry is to examine a bank’s balance sheet and focus on two fundamentals: Asset Sensitivity and Deposit Beta.
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Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
NEW YORK COMM BANCORP 13.14   17.1 0.77 0.68 5.31


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