A company in trouble that is going through a turnaround, New York Community Bank Corp. (NYSE:NYSEB) is one of the least popular banking stocks on the market in recent times. However, one analyst believes the shares are now fairly priced, as he recently upgraded his recommendation on the stock to the equivalent of a hold. That helped the company’s stock gain nearly 9% this week, according to data compiled by S&P Global Market Intelligence.
Rate cut supports struggling lender
The upgrade took place in the early hours of Tuesday morning and came from Raymond James Financial‘s Steve Moss. While Moss has changed his recommendation for New York Community Bancorp from an underweight (in other words, sell) rating, he has not set a price target for the stock.
Tuesday was the day before the Federal Reserve (Fed) pulled the lever on its 50 basis point rate cut; the analyst made the move in anticipation of the regulator’s cut. While economists and other experts varied in their estimates of how deep the cut would be, the vast majority expected some degree of cut.
New York Community Bancorp isn’t realistically poised for a sudden, dramatic improvement. The bank expanded too quickly and in the wrong direction, most notably with its acquisition of struggling lender Signature Bank in 2023. Not long after, it admitted that several large loans in its portfolio were at risk.
Investors sold their shares en masse and management slashed the dividend to almost nothing. The company was in bad enough shape to warrant an investor bailout worth more than $1 billion.
Still not a bargain, but still
With the Fed cutting rates, Moss believes there is “more benefit to owning liability-sensitive” banks in a lower-rate environment. That doesn’t make him a New York Community Bank bull, however, as he warned the company’s recovery would have to take an “extended” period.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Why New York Community Bancorp Surged This Week was originally published by The Motley Fool
