What Happened
New York Community Bancorp (NYCB 0.82%) struggled in April, as its stock price declined 13.8% in the month, according to S&P Global Market Intelligence.
It was a brutal month for stocks overall, as the S&P 500, down 8.8% in April, had its worst month since March 2020, and the Nasdaq Composite, down 13.3% in April, had its worst month since October 2008. Year to date, New York Community Bancorp is down 22%, as of May 3.
Image source: Getty Images.
So what
New York Community Bancorp's decline isn't too surprising, considering that banks, in general, were down roughly 12% in April, according to the KBW Bank Index. The entire market dropped sharply on April 28, as the Dow Jones fell 981 points, the biggest decline since 2020.
The catalyst was primarily comments by Fed Chair Jerome Powell at an International Monetary Fund (IMF) panel discussion. He said that the Fed might raise interest rates by 50 basis points in May to tame inflation.
This spooked the market, but there was another report that same day that served as a double whammy for banks. The Commerce Department came out with a report that said U.S. gross domestic product (GDP) decreased 1.4% in the first quarter, when it was expected to rise 1%. This statistic is more concerning to banks, which are cyclical and perform better in times of economic growth.
Now what
New York Community Bancorp also posted first-quarter earnings on April 27. While earnings were good and roughly in line with analyst estimates, they weren't enough to move the needle.
Net income and earnings per share were up 7% year over year, while revenue climbed 3%, compared to last-yearʻs first quarter. Both loans and deposits were up, compared to the previous quarter ended Dec. 31, 2021. Specifically, loans were up 9% in the quarter, led by multifamily home loans, which were up 13%, while total deposits were up 33%. Also, the efficiency ratio declined to 38.6% from 39.8% after the first quarter of 2021.
A good sign for the bank moving forward is that loan originations were up 39%, compared to the first quarter of 2021, and 59% over the previous quarter.
With interest rates set to spike this week, the stock price should be moving up, as higher rates typically help banks. But all eyes will be on where inflation goes and if the economy goes into recession.
