Buy this undervalued stock before everyone else
2021 has been a good year for banks in general as the sector is up 27% year-to-date, beating the S&P 500. It has a lot to do with macroeconomic trends, like government stimulus funds and a growing economy, and it has a lot to do with the fact that many banks were so devalued last year during the pandemic that it there was nowhere to go but to go up.
In that mix was a small bank that quietly posted strong returns but remains undervalued. This bank also has major catalysts that could propel it even higher in the years to come. This is why you might consider buying undervalued bank stocks New York Community Bancorp (NYSE: NYCB) before everyone else does.
A bank on the move
New York Community Bancorp is the holding company of New York Community Bank, which is the largest savings bank in the United States with approximately $ 57 billion in assets under management. A savings bank is also known as a savings and loan bank as it offers savings and checking accounts for individuals, as well as loans. These banks generally do not provide business loans and services like commercial banks do.
The New York Community Bank has 237 branches in five states – New York, New Jersey, Florida, Arizona, and Ohio – with 128 branches in the New York area. It has spread to other states over the years through acquisitions.
It is growing again with the acquisition of the Michigan-based company Flagstar Bancorp (NYSE: FBC) earlier this year. Flagstar will bring $ 27 billion in assets to New York Community Bancorp as well as some 158 branches in Michigan, Indiana, California, Wisconsin and Ohio. Flagstar is also a leading mortgage lender and service provider, providing loans through a network of wholesale brokers and 86 retail outlets in 28 states.
When the deal closes in the fourth quarter, the combined company will have total assets of $ 85 billion and approximately 400 branches in nine states with 86 retail lending bureaus in 28 states. In addition, it will accelerate New York Community Bank’s transition to a full-service commercial bank, as President and CEO Thomas Cangemi said in April: “The combination of our two companies will enable each of us to continue our transformation into a full-service bank. commercial banking by expanding our product offerings while expanding our geographic reach without overlapping branches. ”
During the second quarter earnings call, Cangemi said the deal had “compelling financial metrics, including double-digit EPS increase and immediate tangible book value creation,” as well as significant growth. deposits and loan opportunities:
And given a larger balance sheet, we will have the opportunity to take advantage of a number of companies and increase our market share. These businesses include both direct and indirect multi-family loans, warehouse mortgages, mortgage banking services as well as the expansion of traditional C&I loans in each of our markets.
New digital payment company
The acquisition of Flagstar is a major catalyst for this bank, which is having a good year, with revenues up 32%, net income up 48% and net interest margin up 32 basis points in the period. second quarter from one year to the next. In addition, loan volume grew 4% year-on-year and the efficiency ratio was low at 37% at the end of the second quarter.
But another major catalyst is a revolutionary new company she is launching with Figure Technologies to create a digital payment process on the Provenance Blockchain, designed for the financial services industry. If your eyes are amazed at the mention of blockchain, just know this: New York Community Bancorp will serve as a financial intermediary, facilitating payments between buyers and sellers of digital stocks of Figure through its new digital marker, USDForward. It is the first digital marker to be used by a bank on the Provenance Blockchain.
The bank plans to move forward with additional marker transactions as well as future projects with Figure Technologies as part of their broader strategic partnership. “This is the first in a series of groundbreaking transactions that we plan to complete with New York Community Bank,” said Mike Cagney, CEO of Figure.
An undervalued stock right now
So you take this efficient bank, you grow it with a major acquisition, and add a revolutionary new business to the blockchain world – and you’ve got a good story. You have an even better story when you realize that this bank is ridiculously undervalued right now with a forward price / earnings (P / E) ratio of around 8 that is trading below its book value with a price / Profit Ratio (P / B) of 0.90. You may want to consider getting into this bank before the market sees its value.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.