Banking & Finance

Daily M&A: New York Community Bancorp, An Acquirer Ahead? (NYB)

New York Community Bancorp Inc. (NYSE: NYB) is one of the banks which held up during the recession and its same $0.25 per quarter dividend has been steady since 2005.  The current dividend yield that the $1.00 per year generates with a $17.54 share price is a whopping 5.70%.  This was one of our recent banks with extremely high dividends that you do not have to wait for the government to approve a higher payout in.  What about M&A?

As this is one of our healthier banks in our universe for investors, we saw a note that came out of Fitch Ratings today which affirmed the bank’s long-term and short-term Issuer Default Ratings at ‘BBB’ and ‘F2’ respectively.  More important was this: its Rating Outlook has been raised to positive from stable.  The bank has been an acquirer and Fitch was discussing its  leading franchise in multi-family lending, strong performance of operations, and a solid asset quality compared to peers.  While non-performing assets have increased, Fitch believes these remain manageable.

How this comes into play with M&A is that NYCB has acquired FDIC-assisted deals with AmTrust and Desert Hills Bank.  More importantly, Fitch sees NYCB as being likely to continue to be an acquirer and in more traditional M&A rather than the few FDIC-assisted deals that are currently available.  Another positive is that NYCB traditionally raises capital around acquisitions, and that defers some of the immediate dilution that could be otherwise expected.

Here are some basic statistics for the Westbury, NY-based bank.  It had about $41 billion in assets at the end of 2010.  Its market cap is $7.64 billion, and Thomson Reuters has estimates of $1.33 EPS and $1.48 EPS for this year and next year.  In a blended normalized earnings scenario, that gives NYCB a forward expected earnings ratio of about 12.5-times forward earnings.  At a share price of $17.54, its 52-week trading range is $14.40 to $19.33.

With a solid dividend profile and with the bank being very selective in New York, New Jersey, Ohio, Florida, and Arizona markets, we would expect that some of the smaller banks in adjacent regions could become targets of NYCB.

The bank split its stock what looks like nine different times throughout the 1990s and the first half of the 2000’s decade.  Its shares peaked above $30 in 2003 to 2004.