On Thursday, Citi adjusted its outlook on New York Community Bancorp (NYSE:NYCB), reducing the bank's price target from $5.00 to $3.50, while retaining a Neutral stance on the stock. The adjustment follows the announcement of a $1.05 billion investment and the appointment of Joseph Otting as the new CEO, which analysts at Citi find to be a step in the right direction, albeit with reservations due to existing uncertainties.
According to Citi, the capital boost is a positive development for New York Community Bancorp (NASDAQ:CTBI), enhancing short-term balance sheet confidence and providing the bank with greater operational flexibility. This move is expected to prevent the bank from sacrificing earnings as it addresses more enduring challenges.
With the assumption of a full conversion of preferred shares to common stock, the near-term earnings outlook is projected to be in the range of 30-40 cents with a pro forma tangible book value (TBV) of $7.40 and a return on tangible common equity (ROTCE) of 5%.
While there is potential for an increase beyond the 5% ROTCE depending on the effectiveness of management's execution, Citi notes that there is considerable work to be done. The firm acknowledges that the investment could prove beneficial in the long term if the bank achieves a normalized ROTCE of over 8%.
Nevertheless, Citi suggests that there are more attractive opportunities in the sector and prefers to observe the performance of the new leadership team before making further assessments.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.