New York Community Bank tries to reassure markets after $1 billion rescue
A new management team at New York Community Bank is trying to reassure investors after the struggling lender announced a $1 billion cash injection under former Treasury Secretary Steven Mnuchin. On Thursday, the bank’s beaten-down shares rose after executives gave investors new information about the state of the company and details of the rescue plan announced the day before.
The company’s leaders, including Joseph Otting, a longtime bank executive and close ally of Mr. Mnuchin who took over as CEO this week, said the bank’s deposits were up more than $4 billion, or 7 percent, last month. decreased. They also announced a dividend cut, the second this year, to just one cent per share.
The bank’s balance sheet will be “strengthened” by the cash injection, Mr. Otting said on a call with analysts and investors, and along with a boardroom overhaul and plans to reduce the lender’s large exposure to the shaky commercial real estate market , “we will We have several levers that we can pull if necessary, while we continue to strengthen the base,” he added.
The bank’s share price rose more than 10 percent in early trading on Thursday, before settling for a gain of 7 percent. As a result, shares are still down about 60 percent since the start of the year as the bank has lurched from one crisis to another, reporting billions in writedowns and raising concerns about the accuracy of its past financial reports. The bank’s stock prices rose and its bonds were downgraded by credit rating agencies.
Amid another decline in the bank’s shares on Wednesday, trading was halted and the $1 billion deal was announced late in the afternoon, which appeared to stabilize the lender. “We view the capital increase as a much-needed step in the right direction, taking the worst-case scenario out of the picture, at least temporarily,” analysts at Stephens wrote in a research note on Thursday.
Analysts at Fitch, a rating agency that recently downgraded the bank, called the cash injection “a positive development in the near term” but warned of the “continued ambiguity regarding the company’s strategic direction and business mix.”
The Hicksville, New York-based bank operates more than 400 branches under brands like Flagstar, one of the largest residential mortgage servicers in the province, and manages an outsized loan portfolio tied to rent-regulated apartments, whose values have suffered under laws that restrict property rights. opportunity to profitably improve the properties.
The bank’s executives told analysts on Thursday that they would diversify its loan portfolio and sell assets to strengthen its balance sheet, among other cost-cutting measures. The dividend cut was a “bitter pill to swallow” for some investors, said Christopher Marinac, research director at Janney Montgomery Scott.
Regulators in Washington are eager to avoid another banking crisis just before the one-year anniversary of the collapse of Silicon Valley Bank. IT and other lenders that failed last year — including Signature Bank, which was eventually acquired by New York Community Bank — were felled after losing a flood of deposits.
A large portion of New York Community Bank’s deposits are insured by the Federal Deposit Insurance Corporation, which covers deposits up to $250,000. About 80 percent of the bank’s deposits fall below that threshold, the bank said Thursday, far more than banks that failed last year. This may have prevented a more dramatic decline in deposits, Mr. Marinac noted.