NYCB's estimate-topping profit forecasts fire up battered shares

By Niket Nishant and Manya Saini

(Reuters) -New York Community Bancorp forecast far better-than-expected profit for the next two years and said on Wednesday it was close to selling $5 billion of assets, sending its beaten-down stock up nearly 27% despite posting a first-quarter loss.

The upbeat forecast boosted confidence in the bank, whose shares have plummeted 70% since January when it cut its dividend and reported a surprise loss due to its loan exposure to commercial real estate.

"We have a clear path to profitability over the following two years," newly appointed CEO Joseph Otting said, charting out the bank's plans for the coming years.

Diversification of its loan portfolio is one of the targets for the medium-term, he said, adding that the bank could announce asset sale in the coming days.

NYCB said it will aim to cut loans to the commercial real estate sector, which has been roiled by high borrowing costs and lower occupancy, to around $30 billion from nearly $47 billion at the end of March.

The bank will also look to increase its share in the commercial and industrial lending space, easing investor concerns about its heavy exposure to rent-regulated multi-family properties and office buildings in New York.

NYCB forecast 2025 earnings per share between 35 cents and 40 cents, higher than the average estimate of 28 cents, according to LSEG data. It also expects 2026 EPS between 50 cents and 60 cents, well above estimates of 36 cents.

"The plan is clear, uncomplicated and does not necessitate anything that we would consider to be a herculean lift," Piper Sandler analysts wrote in a note, upgrading NYCB's stock to "overweight" from "neutral".

Total deposits shrank to $74.9 billion from $81.5 billion at the end of the fourth quarter. Only 16% of its total deposits are uninsured, one of the lowest among peers, and the bank has disclosed enough liquidity to offer expanded deposit insurance.

"While we are still quite early in this turnaround story, we believe shares are likely to move higher today from the smaller-than-feared deposit mix shift trend plus a formal 3-year goal of profitability improvement," Citigroup analyst Benjamin Gerlinger wrote in a note.

Raymond James, however, reiterated its "underperform" rating, saying that turnarounds take a long time.

"We liked new management's vision and business plan, but the timeline and guidance appear optimistic," analyst Steve Moss wrote.

NO RELIEF THIS YEAR

The bank said it expects annual loss between 50 cents and 55 cents per share in 2024, higher than the estimate of a 5 cent loss, suggesting there would be little relief this year.

"We anticipate an elevated level of loan loss provision over the remainder of 2024 related to the potential for market and rate conditions to impact borrower performance on certain portions of our loan portfolio," Otting said.

Provision for credit losses rose to $315 million in the quarter, compared with $170 million a year ago.

The bank posted a loss of $327 million, or 45 cents per share, in the three months ended March 31. That compares with a profit of $2.01 billion, or $2.87 per share, a year earlier.

Loans tied to multi-family properties - apartment buildings with more than four units - made up 45% of the lender's $82.3 billion loan portfolio.

Nearly 7% of the multi-family loan book will reprice this year, the bank said, subjecting those borrowers to higher interest rates.

Office loans, which some analysts have said are more risky than multi-family loans, accounted for nearly 4% of the total loan book, the New York-based lender said.

(Reporting by Niket Nishant and Manya Saini in Bengaluru; Editing by Saumyadeb Chakrabarty and Arun Koyyur)