Why New York Community Bancorp rose this week

A troubled company in the process, New York Community Bancorp (NYCB -4.59%) has been one of the least popular banking stocks in the market lately. However, one analyst believes the stock is now fairly priced as it recently upgraded its recommendation on the stock to the equivalent of a hold. That helped the company’s stock jump nearly 9 percent this week, according to data compiled by S&P Global Market Intelligence.

The rate cut supports struggling lenders

That update happened in the early hours of Tuesday morning and came from Financier Raymond Jamesit’s Steve Moss. Although Moss changed his recommendation on New York Community Bancorp from his previous underweight (sell, in other words), he did not place a price target on the stock.

Tuesday was a day before the Federal Reserve (Fed) held off on cutting interest rates by 50 basis points; the analyst’s move was made in anticipation of the regulator’s downgrade. Although economists and other experts varied in their estimates of how deep the cut would go, the vast majority expected some degree of reduction.

New York Community Bancorp is not realistically poised for a sudden and dramatic improvement. The bank expanded too quickly in the wrong direction, particularly with its 2023 acquisition of troubled lender Signature Bank. Not long after, he admitted that a lot of large loans in his portfolio were at risk.

Investors sold off the stock vigorously, and management slashed the dividend to next to nothing. The company was in bad enough shape to warrant an investor bailout of more than $1 billion.

It’s not a purchase though

With the Fed cutting interest rates, Moss believes there is “increased merit in holding liability-sensitive banks” in a lower rate environment. That doesn’t make him a Community Bank of New York bull, however, as he warned the company’s recovery should take an “extended” period.