Tuesday, FBR Capital Markets upgraded New York Community Bancorp Inc. (NYB) shares to Market Perform from Underperform and increased its price target to $10 from $9. The brokerage reiterated its 2009 operating EPS estimate of $0.90, and its 2010 estimate of $0.95.
Analyst Bob Ramsey attributed the upgrade based on new risk-adjusted bank valuation framework. The analyst's more favorable outlook is driven by his new proprietary risk-adjusted valuation framework, which he uses as a tool to evaluate opportunities for achieving relative performance in the bank space.
The analyst said that given expected ROTEs, NYB has a high implied upside on valuation, but also has an above-average risk profile given recent acceleration in credit deterioration, earnings volatility, and pre-provision earnings power relative to peers.
While the analyst expects minimal losses from NYB's core rent-stabilized multifamily loan portfolio, not all collateral is rent stabilized, and he is concerned that NYB has a smaller allowance than its peers, even for its multifamily loans. Further, capital levels have been falling since its second quarter of 2008 capital raise given the company's hefty dividend.
Currently, NYB is up $0.24 or 2.16% and trading at $11.35.
For comments and feedback: editorial@rttnews.com