Citi lifts Flagstar Bank target to $15.50, affirms Buy rating

On Thursday, Citi analyst Ben Gerlinger updated the financial outlook for Flagstar Bank (NYSE:FLG), raising the price target to $15.50, up from the previous $15.00, while reiterating a Buy rating on the stock. The adjustment reflects a positive view of the bank’s recent legal actions and its potential impact on loan repayment. With the stock currently trading at $12.32 and showing strong momentum with a 32% year-to-date return, InvestingPro analysis suggests the stock is slightly overvalued based on its Fair Value model.

Flagstar Bank, with a market capitalization of $5.1 billion, recently took a significant legal step by filing a motion on Wednesday for the appointment of a court-ordered receiver against Pinnacle Group. This move is part of an ongoing legal strategy that began earlier this year when Flagstar Bank initiated pre-foreclosure proceedings against Pinnacle Group. The bank is addressing 90 loans originally valued at over $600 million. According to InvestingPro data, the bank currently shows weak financial health metrics, which makes this legal recovery strategy particularly crucial.

The legal actions span four cases across different boroughs of New York City—Manhattan, Brooklyn, Queens, and Bronx. As of March 31, 2025, the current principal balance of these loans is approximately $590 million, which represents 18% of Flagstar Bank’s total nonperforming loans.

The analyst believes that the appointment of a receiver is highly probable and would be advantageous for Flagstar Bank. If the court grants the motion, the bank’s first lien status could facilitate the recovery of funds through property-generated cash flow, primarily from tenant rent rolls.

This latest development, combined with adjustments to the bank’s expense projections for 2025 and 2026, has led to the increased price target. The anticipated reduction in future loan loss provision (LLP) expenses also contributes to the more optimistic financial forecast for Flagstar Bank. For a comprehensive analysis of Flagstar Bank’s financial health and future prospects, including additional ProTips and detailed metrics, investors can access the full Pro Research Report available on InvestingPro.

In other recent news, Flagstar Financial Inc. reported its first-quarter 2025 earnings, revealing a narrower-than-expected loss. The company posted an adjusted net loss of $0.23 per share, surpassing analysts’ expectations of a $0.28 loss. However, revenue fell short of forecasts, coming in at $490 million against the anticipated $510.44 million. Despite the revenue miss, the company’s strategic focus on cost management and operational efficiency led to a reduction in non-interest expenses by $71 million quarter-over-quarter. Flagstar is targeting profitability by the fourth quarter of 2025, with plans to expand its balance sheet to $96 billion by year-end. The company is also aiming for $1 billion in quarterly commercial and industrial loan originations. Analysts from firms such as Piper Sandler have shown interest in the company’s cost management strategies and lending growth prospects. CEO Joseph Otting expressed confidence in the company’s trajectory, highlighting improvements in credit quality and risk management.

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