Stock Markets

New York Community Bank’s path to $100 billion club and share slide

Published

10 months ago

February 2, 2024

New York Community Bank's path to $100 billion club and share slide

(This Jan. 31 factbox has been corrected to say $185 million, not $185 billion, in paragraph 11)

By Nupur Anand

NEW YORK (Reuters) – Nearly a year ago, New York Community Bank waded into the regional bank crisis, buying up assets in failed Signature Bank (OTC:), helping secure a spot in the list of banks with over $100 billion in assets.

On Wednesday, the bank became the one under investor scrutiny after it posted an unexpected quarterly loss and its shares sank nearly 40%.

The surprise loss drove down other regional bank shares, dragging the KBW regional index down 6%, as it reignited concerns over the health of smaller lenders some of which are still recovering from bank failures in the U.S. last year.

Here are key facts about NYCB. The bank did not respond to an email request seeking comment.

* Thomas Cangemi, the CEO of NYCB, a long time bank veteran took over its reins in December 2020 and has been working to transition NYCB into a full-service commercial bank.

* Founded in 1859, the bank long served as a small regional bank. Between 2000 and 2023, NYCB completed 13 acquisitions. With two recent acquisitions, including Flagstar Bank, it expanded its footprint across the country.

* As of Dec. 31, the bank had $116.3 billion in total assets, $85.8 billion of loans, and $81.4 billion of deposits.

* In 2023, NYCB emerged as a buyer of failed Signature bank that was shuttered after unsustainable deposit outflows. NYCB acquired $34 billion of deposits, $13 billion in loans and $25 billion in cash from the failed bank, catapulting it into the over-$100 billion-in-assets club. These banks are required to follow stricter capital and liquidity requirements as mandated by the regulators.

Cangemi said on Wednesday the changes in its financial profile that pushed it into the new category occurred faster than expected.

“This (Signature’s) acquisition allows us to advance our strategy while strengthening and diversifying our balance sheet. However, we will become a $100 billion-plus bank sooner than we had anticipated,” Cangemi said on an analyst call on Wednesday. The bank crossed the $50 billion asset threshold in 2018.

* The bank had to set aside a higher sum to meet the regulatory requirements this quarter along with parking more money in its rainy day funds to cover potential losses, which led to an adjusted loss of $185 million. The bank also slashed its dividend by 70%.

* Regional banks that have a higher share of commercial real estate loans have been in the spotlight as concerns around these loans going sour have remained elevated since the March 2023 banking crisis. NYCB made increased provisions around its CRE loan books which once again raised concerns around this portfolio, said Ken Usdin, an analyst at Jefferies.

* A sluggish and cloudy outlook for 2024 also weighed on the bank’s stock performance. Despite a few repeated requests for clear guidance on net interest income by analyst Steven Alexopoulos at JPMorgan, management did not provide a number. JPMorgan declined to comment.

Keith Horowitz, analyst at Citigroup said there was a lot of uncertainty about the guidance due to missing pieces of information on net interest income and credit.

It is likely the stock will remain under pressure as a result of the dividend cut and the poor outlook, said Christopher McGratty, an analyst at KBW.

Stock Markets

Citi completes split of Mexico business ahead of Banamex IPO

Published

19 hours ago

December 3, 2024

(Reuters) – Citigroup (NYSE:) has completed the separation of Banamex from its institutional banking business in Mexico as it prepares to list the retail bank, the Wall Street giant said on Monday.

The move to split Grupo Financiero Citi México from Grupo Financiero Banamex is part of Citi’s sweeping overhaul under CEO Jane Fraser aimed at simplifying its sprawling structure as it looks to improve the bank’s performance.

The New York-based bank is continuing to work on the proposed initial public offering of Banamex, the timing of which will depend on regulatory approvals and market conditions, Citi said.

“This separation represents an important milestone in our simplification,” Fraser said. “We will now prepare for the Banamex IPO.”

Citi has weighed a dual stock listing for the Banamex unit, possibly in Mexico City and New York, Reuters has reported.

The bank had previously said it planned to list its Banamex unit, which caters to nearly 20 million clients and has a network of 1,300 branches in Mexico, in 2025.

Citi was close to a $7 billion deal to sell Banamex to Mexican billionaire German Larrea’s conglomerate Grupo Mexico last year.

But tensions between the conglomerate and Mexican President Andres Manuel Lopez Obrador led to the two sides abandoning the deal, with Citi deciding to pursue an IPO instead.

Citi México will maintain a “significant” presence in the country and continue to serve the bank’s institutional clients with a team of roughly 3,000 employees.

The bank has closed its consumer banking divisions in nine markets since announcing its intention to exit the business across 14 markets in Asia, Europe, the Middle East, and Mexico, it said. Citi currently has a sale process underway in Poland.

Citi said its previously announced wind-downs of consumer businesses in China and Korea and overall presence in Russia are also nearly complete.

Stock Markets

Select Energy Services Stock Hits 52-Week High at $14.88

Published

19 hours ago

December 3, 2024

Select Energy Services Inc. (NYSE:) stock has reached a new 52-week high, trading at $14.88, with InvestingPro analysis showing strong financial health scores and a market capitalization of $1.77 billion. This milestone reflects a significant period of growth for the company, with the stock price doubling over the past year, marking an impressive 100.27% change. Investors have shown increased confidence in the company’s performance and future prospects, with analysts setting a high target of $19. The company maintains a healthy current ratio of 1.78 and has achieved 40% dividend growth. InvestingPro subscribers can access 12 additional key insights and a comprehensive Pro Research Report, part of the platform’s coverage of 1,400+ US stocks.

In other recent news, Select Water Solutions has reported significant growth in its third-quarter earnings call. The company has seen a 20% increase in third-quarter revenues and a 33% rise in gross profit before depreciation and amortization (D&A) compared to the previous quarter. Year-over-year figures are even more impressive, with revenue up by 40% and gross profit surging by 99% compared to the same period last year.

The company has secured 25,000 acres under long-term contracts in the Permian Basin and two pipeline agreements in the Bakken. In addition, a disposal acquisition in the Northern Delaware Basin has added 10,000 barrels per day of capacity. Despite expected seasonal declines in the fourth quarter, Select Water Solutions expects Q4 margins to remain strong at 51%-54%.

The company has increased its quarterly dividend by 17% to $0.07 per share and allocated approximately $150 million for growth capital in the water infrastructure segment. Select Water Solutions anticipates achieving record adjusted EBITDA for 2024 and significant growth in 2025. These recent developments highlight the company’s ongoing commitment to enhancing its service base and positioning itself for continued growth.

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Stock Markets

Morgan Stanley shuffles cyber stock ratings

Published

19 hours ago

December 3, 2024

Investing.com — Morgan Stanley made changes to its cybersecurity stock ratings on Monday, reflecting a more cautious stance for 2025 amid an evolving market environment.

While long-term prospects for the industry remain positive, analysts are adopting a more selective approach due to near-term pricing pressures and a less favorable U.S. fiscal backdrop.

The firm remains “positive on long-term tailwinds in security,” driven by advancements like GenAI and public cloud, which expand the attack surface and create new security needs.

However, Morgan Stanley (NYSE:) highlights several near-term risks. They note the spending environment is stable but still challenging, with tight budgets and increasing vendor consolidation putting pressure on pricing.

“CIOs/CISOs [are] looking to consolidate multiple vendors,” which could negatively impact prices in 2025, according to the investment bank.

In light of these pressures, the firm upgraded two cybersecurity stocks while downgrading others.

Morgan Stanley upgraded Cloudflare (NYSE:) and Okta (NASDAQ:) to Overweight, citing emerging AI product cycles and turnaround opportunities, respectively.

The bank sees incremental upside in companies with emerging product cycles, such as NET’s growth in Edge AI and OKTA’s improving demand and product cycles.

On the other hand, SentinelOne (NYSE:) and Tenable were downgraded to Equal-Weight from Overweight.

The downgrade of S reflects a “slower expected demand for core endpoint security in 2025” and pricing pressures from competitors. Meanwhile, TENB is said to face risks due to its high exposure to the U.S. public sector, which could see budget cuts.

Morgan Stanley also continues to favor “platform consolidators” like Palo Alto Networks (NASDAQ:) and CrowdStrike (NASDAQ:) in the long term but notes that near-term headwinds could limit their upside as they work through platformization challenges and above-average valuations.

Overall, while cybersecurity remains a key priority for organizations, near-term risks ”may not be fully appreciated by investors heading into 2025,” the firm concludes.