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shares of New York Community Bancorp, Inc. (NYSE:NYCB) has plunged more than 54% so far this year as it struggles to manage its assets in the latest wave of the regional banking crisis. The bank reported a total loss of $252 million in the fourth quarter of 2023 and cut its dividend by about 71% from the previous quarter to $0.05 per share.
Acquisition of Signature Bank
In the aftermath of last spring’s banking crisis, New York Community Bank (NYCB) lost most of Signature Bank’s business, consisting of $13 billion worth of loans (primarily commercial and industrial) and $34 billion worth of deposits. Seized the opportunity to acquire .
NYCB executives expressed confidence that the Signature acquisition strengthened the bank by introducing “low-cost deposits” and lucrative business for mid-market companies and high-net-worth individuals.
NYCB’s total assets increased to more than $100 billion after the acquisition, making it one of the leading regional players with more than 420 branches nationwide.
Nevertheless, the bank revealed in its latest earnings report that its expansion following the acquisition of Signature Bank has exacerbated the challenge. The value of commercial real estate loans plummeted, accounting for the bulk of the quarterly loss.
This is likely due to a decline in office occupancy demand following the pandemic and an increase in loan costs due to higher interest rates.
Moody’s downgraded New York Community Bancorp from Baa3 to Ba2 after the company released its financial results, citing “multiple financial, risk management, and governance challenges.”
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Recovery measures
The disappointing earnings report sent investors into a panic, leading to a sharp decline in NYCB stock. However, the bank released current liquidity and deposit information in a Feb. 6 press release, stating that its total liquidity of $37.3 billion exceeds its total uninsured deposits of $22.9 billion.
“Our actions are investments to strengthen our risk management framework commensurate with the bank’s size and complexity and provide a solid foundation for the future.Despite the downgrade by Moody’s, and [Morningstar] DBRS remains investment grade,” said Thomas R. Cangemi, president and CEO of New York Community Bancorp.
The effectiveness of NYCB’s recent efforts remains uncertain. A pivotal move in this turnaround effort was the appointment of Alessandro Dinero as the new Executive Chairman. Dinero, who oversaw Flagstar Bank until it was acquired by NYCB in 2022, said on the call that he and Cangemi are committed to guiding the company back to financial stability.
“This company has strong fundamentals, liquidity and deposit base, which gives us confidence in our path forward,” Dinero said in the latest earnings call. “If we have to downsize, we downsize. If we have to sell non-strategic assets, we sell them.”
The company’s quarterly results sent investors into a panic, but subsequent financial updates reassured shareholders. Billionaire hedge fund manager George Soros, founder of Soros Fund Management, has increased his stake in the troubled bank to 1.48 million shares.
In contrast to large banks such as JPMorgan Chase and Bank of America, which boast diverse lines of business, smaller banks such as New York Community Bancorp operate within a narrow range of areas. As a result, certain sectors are susceptible to simultaneous recessions. financing sector.
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This article New York Community Bancorp shares fall 54%—is a local bank storm brewing?originally appeared on his Benzinga.com
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