Forget New York Community Bancorp: Billionaires are buying this bank stock instead

New York Community Bancorp (NYCB 8.45%) it’s a turnaround stock that only the most aggressive investors will want to own. On the other hand, more conservative investors will probably find M&T Bank (MTB 2.46%) a much more attractive option, noting that a total of 13F filings show that it is one of the largest investors in the world. Here’s why you might want to avoid New York Community Bancorp and buy M&T Bank instead, as the so-called “smart money” does.

New York Community Bancorp collapsed

When interest rates rose, banks could initially charge higher rates on loans and make more money. But then there was increasing competition for customers’ cash, which forced banks to raise the interest they offered on banking products (such as checking accounts, CDs, and checking accounts). In other words, the basic functioning of banks has become more difficult. In addition, higher rates increased the risk of default among borrowers.

Image source: Getty Images.

This is the background against which New York Community Bancorp’s business began to falter. However, the biggest push towards trouble probably came from the bank’s acquisition of two similar banks in just a few years. The increase in scale meant increased scrutiny from regulators, which New York Community Bancorp simply wasn’t ready for. In addition, some loans unexpectedly deteriorated while competition increased.

The bank ended up reducing its dividend to a mere token and received a $1 billion bailout from outside investors.

Right now, New York Community Bancorp is a high-risk turnaround piece. Given the bailout and complete management overhaul, the bank is likely to survive. But business won’t return to normal until late 2026 at the earliest, according to management. If you don’t have a strong stomach, you’d better buy another bank.

Big investors buy M&T Bank

M&T Bank is the bank among the top 10 stocks receiving the most attention from large investors, according to a cumulative analysis of 13F filings by WhaleWisdom.com. M&T Bank is a regional bank serving the Northeast US with a network of more than 1,000 branches spanning 12 states from Maine to Virginia. In 2022, it bought People’s United Bank. The key here is that M&T Bank has some notable business similarities to New York Community Bancorp, but it has not fallen into financial trouble.

MTB data by YCharts.

To be fair, M&T Bank isn’t exactly hitting on all cylinders right now. Q2 2024 revenue results were acceptable, but down year-over-year in key areas. For example, revenues fell by 11.5%. Earnings per share fell from $5.05 in Q2 2023 to $3.73 in 2024.

Return on equity fell to 9.9% from 14.2% and allowances for bad loans rose from 0.38% to 0.41%. None of this is great, but M&T Bank is handling a tough situation pretty well — and certainly better than New York Community Bancorp managed.

That said, shares of M&T Bank are about 15% below the highs they hit in 2023. The stock has rallied, likely on the back of increased popularity among large investors, but there’s still potential for recovery here. After that, the bank’s recent acquisition-led expansion and the potential for its financial results to improve amid more favorable market conditions suggest there could be more room for appreciation.

While you wait for better times, in the meantime, you can collect the stock’s 3.2% dividend yield. While it’s not huge, it’s more than the 1.2% you’d get from S&P 500 the index and the average of 2.7% for regional banks, using SPDR S&P Regional Banking ETF (KRE 5.08%) as a proxy.

M&T Bank isn’t perfect, but the “smart money” seems to like it

Given its recent financial results, it’s hard to suggest that M&T Bank is doing well right now. But it’s also not falling off a cliff like New York Community Bancorp did. If you’ve been looking at troubled New York Community Bancorp, you might want to take the time to see why big investors are buying M&T Bank instead. You may find yourself wanting to chase the billionaires instead of hoping that New York Community Bancorp can successfully turn around its business.