New York Community Bancorp faced adversity and crumbled. M&T Bank is sailing right along under the same conditions.
New York Community Bancorp (NYCB 8.45%) is a turnaround stock that only the most aggressive investors will want to own. On the other hand, more conservative investors will probably find M&T Bank (MTB 2.46%) a far more appealing option, noting that an aggregate of 13F filings shows that it is a favorite among the world's largest investors. Here's why you might want to avoid New York Community Bancorp and, instead, buy M&T Bank, like the so-called "smart money" is doing.
New York Community Bancorp crumbled
When interest rates rose, banks could initially charge higher rates for loans and earn more money. But then there was increasing competition for customer cash, which forced banks to raise the interest they offered on banking products (like bank accounts, CDs, and checking accounts). In other words, the basic operation of banks got harder. On top of that, higher rates increased the risk of default among borrowers.
Image source: Getty Images.
That's the backdrop under which New York Community Bancorp's business began to falter. The biggest push toward trouble, however, probably came from the bank's purchase of two bank peers in just a few years. The increase in scale meant increased scrutiny from regulators, which New York Community Bancorp just wasn't ready for. Additionally, some loans soured unexpectedly while competition rose.
The bank ended up cutting its dividend to a mere token and took a $1 billion bailout from outside investors.
Right now, New York Community Bancorp is a high-risk turnaround play. Given the bailout and the complete overhaul of management, the bank will probably survive. But business won't be back to normal until the end of 2026, at the earliest, according to management. Unless you have a strong stomach, you'll be better off buying another bank.
Big investors are buying M&T Bank
M&T Bank is the bank among the top 10 stocks getting the most attention from large investors, according to a cumulative review of 13F filings by WhaleWisdom.com. M&T Bank is a regional bank serving the U.S. Northeast, with a network of over 1,000 branches that spans 12 states from Maine to Virginia. In 2022, it bought People's United Bank. The key here is that M&T Bank shares some notable business similarities with New York Community Bancorp, but it didn't fall into financial trouble.
MTB data by YCharts.
To be fair, M&T Bank isn't exactly hitting on all cylinders right now. Second-quarter 2024 earnings results were acceptable, but they were down year over year in key areas. For example, revenues declined 11.5%. Earnings per share fell from $5.05 in Q2 2023 to $3.73 in 2024.
Return on common equity dropped to 9.9% from 14.2%, and charge-offs for bad loans increased from 0.38% to 0.41%. None of that is great, but M&T Bank is muddling through a rough spot reasonably well -- and certainly better than New York Community Bancorp managed to.
That said, M&T Bank's stock is around 15% below the highs it reached in 2023. The stock has been rallying, likely as a result of the increased popularity among large investors, but there's still some recovery potential here. After that, the bank's recent acquisition-led expansion and the potential for improvement in its financial results amid more favorable market conditions suggest there could be more room for appreciation.
While you wait for better times, meanwhile, you can collect the stock's 3.2% dividend yield. While not huge, it's more than the 1.2% you'd get from the and the 2.7% average for regional banks, using the SPDR S&P Regional Banking ETF (KRE 5.08%) as a proxy.
M&T Bank isn't perfect, but the "smart money" seems to like it
Given the recent financial results, it is hard to suggest that M&T Bank is thriving right now. But it isn't falling off a cliff, either, as did New York Community Bancorp. If you have been looking at troubled New York Community Bancorp, you might want to take the time to see why big investors are buying M&T Bank instead. You might find that you want to follow the billionaires instead of hoping that New York Community Bancorp can successfully turn around its business.
Reuben Gregg Brewer 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.
FAQs
Is This You? New York Community Bancorp, Inc. is a bank holding company, which engages in the provision of multi-family loans on non-luxury rent-regulated buildings that feature below-market rents. It also offers financial products and services to individuals and businesses.
What bank did New York Community Bank merge with? ›
(NYSE: NYCB) (the "Company)" and its subsidiary, Flagstar Bank, N.A., ("Flagstar" or the "Bank"), today announced completion of the operational conversion of systems for New York Community Bank and Flagstar Bank, and national rebranding to Flagstar—further integrating the Company as one bank and one team.
Is New York Community Bancorp a buy? ›
Is NYCB a Buy, Sell or Hold? New York Community Bancorp has a consensus rating of Hold which is based on 1 buy ratings, 9 hold ratings and 0 sell ratings. What is New York Community Bancorp's price target? The average price target for New York Community Bancorp is $11.25.
What is the book value of New York Community Bancorp? ›
New York Community Bancorp's current price is $10.555. Its book value per share for the quarter that ended in Jun. 2024 was $22.47. Hence, today's PB Ratio of New York Community Bancorp is 0.47.
Why is NYCB stock so low right now? ›
New York Community Bancorp
The regional bank is struggling with the fallout from risky acquisitions and a challenging commercial real estate market. Shares of New York Community Bank (NYCB 4.85%) dropped 68.6% in the first six months of the year, according to data provided by S&P Global Market Intelligence.
Is New York Community Bank a good bank? ›
About New York Community Bank
New York Community Bank has an average rating of 2.1 from 94 reviews. The rating indicates that most customers are generally dissatisfied. The official website is mynycb.com. New York Community Bank is popular for Banks & Credit Unions, Financial Services.
Is NYCB in trouble? ›
NYCB is in trouble because of a couple of factors that have been roiling America's smaller banks: High interest rates and low commercial real estate values.
Will NYCB be bought out? ›
The sale is expected to close in the third quarter of 2024. About New York Community Bancorp, Inc. New York Community Bancorp, Inc. is the parent company of Flagstar Bank, N.A., one of the largest regional banks in the country. The Company is headquartered in Hicksville, New York.
Why did New York Community Bank fail? ›
“As part of management's assessment of the company's internal controls, management identified material weaknesses in the company's internal controls related to internal loan review, resulting from ineffective oversight, risk assessment and monitoring activities,” the bank said in the filing.
What is the stock price forecast for New York Community Bank in 2025? ›
On average, Wall Street analysts predict that New York Community Bancorp's share price could fall to $11.30 by Jul 29, 2025. The average New York Community Bancorp stock price prediction forecasts a potential downside of 1.05% from the current NYCB share price of $11.42.
As of September 2024 New York Community Bank has a market cap of $4.47 Billion. This makes New York Community Bank the world's 2921th most valuable company by market cap according to our data.
What is the stock price of Community bank today? ›
The Community Bank System Inc stock price today is 57.44.
How big is New York Community Bancorp? ›
About New York Community Bancorp, Inc.
Flagstar Bank, N.A. operates 420 branches, primarily in the Northeast and Midwest. Flagstar Mortgage operates nationally through a wholesale network of approximately 3,000 third-party mortgage originators.
How many shares are outstanding in NYCB? ›
What is the PE ratio of NYCB? ›
P/E ratio as of September 2024 (TTM): 2.46
According to New York Community Bank 's latest financial reports and stock price the company's current price-to-earnings ratio (TTM) is 2.455. At the end of 2022 the company had a P/E ratio of 20.5.
What bank is Bancorp affiliated with? ›
Yes, U.S. Bancorp [NYSE: USB] is the publicly traded parent company of U.S. Bank. While we often use U.S. Bancorp in formal documents and corporate filings, U.S. Bank is what you'll see on branches, app stores, national television commercials and much more.
What cards are under Bancorp? ›
Important Disclosures
- PayPal Prepaid Mastercard® (47)
- PEX Visa® Base Business Prepaid Card. (22)
- MyVanilla Prepaid Card. (16)
The company provides banking, investment, mortgage, trust, and payment services products to individuals, businesses, governmental entities, and other financial institutions.
Is Bancorp an actual bank? ›
The Bancorp Inc (Bancorp) is a provider of banking and other related financial solutions to individuals and corporate clients through its subsidiary, the Bancorp Bank. It offers payment solutions such as prepaid and debit card accounts, bill payments, payroll, and clearing and settlement services.
