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Mike Seeger/Reuters
New York Community Bancorp’s stock price fell Wednesday after the company reported an unexpectedly large loss last quarter.
new york
CNN
—
Local bank stocks are back in the spotlight thanks to New York Community Bancorp’s truly frightening financial report.
On Wednesday, the regional lender reported an unexpected loss of $252 million in the previous quarter, compared to a profit of $172 million in the fourth quarter of 2022. The company reported credit losses of $552 million, up significantly from $62 million in the previous quarter.
As a result, New York Community Bancorp’s stock price fell 38% in one day, hitting a 25-year low.
New York Community Bancorp CEO Thomas Cangemi blamed the company’s poor quarterly performance on $13 billion worth of loans from now-defunct Signature Bank, one of the regional banks that failed during last year’s financial crisis. This is the result of the acquisition of nearly $40 billion in assets, including
With this acquisition, New York Community Bancorp’s total assets exceed $100 billion. Crossing this threshold is important for banks because by law it means they must set aside more capital for future losses. However, this limits the amount banks can lend.
Cangemi said he hopes to “right-size” the business over time. In the meantime, steps such as dividend cuts are needed to free up cash, he told analysts on a conference call Wednesday morning.
“There’s no question that it was a difficult decision for us as a company, but it was clearly necessary,” he said.
New York Community Bancorp declined to comment beyond announcing its financial results.
Other local bank stocks also fell due to the bank’s stress, with the KBW Regional Bank Index closing down 6% on Wednesday.
That’s nothing compared to the devastating slump local bank stocks encountered last spring. Additionally, small regional banks have largely recovered from the increased stress caused by the failure of three banks last year.
But New York Community Bancorp’s problems could open new wounds.
At the same time, there is reason to believe that the bank just had a bad quarter and is not on the verge of failure.
Deposits fell just 2% last quarter, and the decline was even smaller when you exclude deposits in custody related to the Signature Bank acquisition.
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