Signature Deal Merits an Upgrade, Says Analyst – TipRanks Financial Blog

Banks are having a hard time, you say? Tell that to investors of New York Community Bancorp (NYCB). As the banking crisis entered another phase at the start of the week, NYCB appeared to be one of the main beneficiaries of the chaos; in Monday’s trading, the shares saw out the session sitting 31.5% into the green.

The surge came in the wake of the FDIC’s announcement that an agreement had been reached with NYCB subsidiary Flagstar Bank to buy a big chunk of Signature Bank’s loan and deposit portfolio. As of Monday, March 20, Signature’s 40 former branches began operating under the Flagstar banner. Recall, following Silvergate Bank and Silicon Valley Bank’s collapses, Signature was the third high profile bank to go under in quick succession; the regulators closed down the bank on March 11 after the bank sustained large deposit outflows and regulators lost faith in management’s ability to deal with the situation.

Signature’s crypto business or its fund banking business (which provided loans to private equity and venture capital firms) has been left out of the deal. In total, NYCB is buying assets worth $38.4 billion, including $12.9 billion of loans bought at a discount of $2.7 billion.

Given that in exchange for the $2.7 billion discount on acquired loans, plus the interest income earned on the loans and securities, NYCB will hand over to the FDIC just $300 million in equity appreciation rights, Wedbush analyst David Chiaverini thinks these are “very favorable terms.”

“Taking the $2.7 billion of discount netted against the $300 million of increased equity results in a net benefit to shareholders of $2.4 billion, which when compared to the company’s $4.5 billion market cap (on 3/17), represents material upside to the stock, in our view,” the analyst explained. “This deal is right in-line with the expansion goals set forth by CEO Thomas Cangemi when he took the helm at NYCB in early 2021.”

As a result, Chiaverini upgraded his NYCB rating from Neutral to Outperform (i.e., Buy) and bumped the price target up from $10 to $11. Even after Monday’s gains, there’s room for additional upside of 28% from current levels. (To watch Chiaverini’s track record, click here)

Most analysts agree with the Wedbush view; based on 7 Buys vs. 2 Holds, the stock claims a Strong Buy consensus rating. Going by the $10.39 average target, the shares will appreciate by 21% over the coming months. (See NYCB stock forecast on…