New York Community Bank The company said on Thursday it had lost 7% of its deposits in a tumultuous month, before announcing investors led by former Treasury Secretary Steven Mnuchin’s Liberty Strategy Capital Capital injection of over US$1 billion.
NYCB said in an investor note that as of March 5, the bank had $77.2 billion in deposits Promotional meeting Tied to raising funds. That’s down from $83 billion as of Feb. 5, the day before Moody’s Investors Service downgraded the bank’s credit rating to junk status.
NYCB also said it would cut its quarterly dividend for the second time this year, from 5 cents to 1 cent per share, a drop of 80%. The bank paid a 17-cent dividend until it reported an unexpected fourth-quarter loss, kicking off a negative news cycle for the Long Island-based bank.
NYCB’s stock price was in turmoil on Wednesday amid concerns about the bank’s loan book and deposit base, before a group of private equity investors led by Mnuchin’s Liberty Strategy Capital announced a major lifeline. In just over a month, the bank has twice replaced its chief executive, received two rounds of downgrades from rating agencies and announced deepening losses.
On Wednesday, NYCB shares fell below $2 per share, a drop of more than 40%, but eventually rebounded to close higher. The stock rose 10% in early trading Thursday.
The capital injection announced Wednesday raises hopes that the bank now has enough time to address lingering questions about the risk of multifamily apartment loans in the New York area, as well as “significant deficiencies” in loan reviews that the bank disclosed last week.
“Very attractive” bank
Mnuchin said in an interview with CNBC on Thursday that he started paying attention to NYCB “a long time ago.”
Mnuchin told CNBC: “The issue really revolves around the perceived risk in the loan, and by putting billions of dollars of capital into the balance sheet, it really strengthens the franchise, regardless of what the issues are in the loan. We’ll all be able to figure it out.” “Quacking in the streets.”
“I think this is a great opportunity to transform it into a very attractive regional commercial bank,” he added.
Mnuchin said he conducted an “extensive investigation” of the Bank of New York’s loan portfolio and found that the “biggest problem” was loans from its New York office, although he expected the bank to build reserves over time. .
“I don’t think the New York office is going to be successful or get better in the future,” Mnuchin said.
Lenders shrinking?
Incoming chief executive Joseph Otting, a former comptroller of the currency, told analysts on Thursday that the bank would seek to strengthen its capital and liquidity levels and reduce its concentration on commercial real estate lending.
Piper Sander analysts led by Mark Fitzgibbon said NYCB may have to sell assets, build reserves and take write-downs.
The bank, which has $116 billion in assets, is evaluating whether it should cut assets below a key $100 billion threshold, executives said on Thursday, which would increase regulatory scrutiny of capital and risk management.
When analysts asked about this Alessandro DiNello, the bank’s chairman, said the bank was granted a “waiver” allowing it to keep escrow accounts it may have lost due to concerns about deposit withdrawals following downgrades from ratings agencies.
“Now I think, given this financing, we expect that relationship to continue as it is,” Dinello said.
While news of Mnuchin’s investment is generally positive for regional banks, Wells Fargo analyst Mike Mayo warned that a cycle of commercial real estate losses is just beginning as loans come due this year and next, which could spell trouble for lenders. brings more problems.
—CNBC’s Laya Neelakandan and Ritika Shah contributed to this report.
Correction: New York Community Bank announced an investment Wednesday from a group of private equity investors. An earlier version of this story incorrectly described this day.
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