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Bank of America said New York Community Bancorp’s problems are unlikely to herald another banking crisis. New York CB stock plunged more than 37% on Wednesday, its worst day since going public in 1993. The brutal drop came after the bank reported a loss in the fourth quarter, a $552 million provision for credit losses and a rate cut. Make that dividend to strengthen your capital. NYCB took over Signature Bank, which failed during the 2023 local banking crisis. Bank of America’s credit strategy team said in a report Wednesday that problems at NYCB, which has $116 billion in assets, appear to be limited to local banks. BofA said fourth-quarter results for the six largest U.S. banks and other large regional banks were “positive in terms of credit quality.” “This suggests that the NYCB surprise was likely a one-time event and was not indicative of a broader problem,” the Bank of America team said in a note. NYCB 5D Mountain New York Community Bancorp Second, Bank of America said large banks have strong capital buffers against credit losses. Additionally, the company said the environment should improve for the sector as the Fed moves closer to starting its easing cycle. Other analysts pointed to the fact that NYCB recently reached over $100 billion in assets and achieved Category IV bank status, requiring higher reserve levels. Category IV refers to banking standards for U.S. banks with total assets of $100 billion or more. “Being a Category IV bank with more than $100 billion in assets, management is looking to maintain peer-like reserve levels and a near-peer CET1 ratio,” RBC analyst Jon Erfstrom said in a note to clients. I think we have recognized the need to maintain it.” , refers to common stock Tier 1 capital obligations. Mr. Jeffries also noted the “unexpectedly expedited regulatory mandate” for Category IV banking compliance for NYCB. RBC and Jefferies downgraded NYCB’s investment rating on Thursday. After the dividend cut, the stock currently yields 3.1%, but was up 2.5% in early Thursday trading. —CNBC’s Michael Bloom contributed reporting.
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