Tuesday, March 19, 2024
Year : 2, Issue : 12
Embattled lender New York Community Bank disclosed a litany of financial metrics in the past 24 hours in a bid to soothe skittish investors.
But one of the most crucial resources for any bank appears to be in short supply for NYCB lately: confidence.
The regional bank late Tuesday said that deposits were stable at $83 billion and that the firm had ample resources to cover any possible flight of uninsured deposits. Hours later, it promoted chairman Alessandro DiNello to a more hands-on role in management.
The moves spurred a 6% jump Wednesday in NYCB shares, a small dent in the stock’s more than 50% decline since the bank reported fourth-quarter results last week. On Thursday, shares of the Hicksville, New York-based lender resumed their decline, falling more than 6%.
The sudden decline in NYCB, previously deemed one of last year’s winners after acquiring the assets of Signature Bank, reignited fears over the state of medium-sized American banks. Investors have worried that losses on some of the $2.7 trillion in commercial real estate loans held by banks could trigger another round of turmoil after deposit runs consumed Silicon Valley Bank and Signature last March
Real estate
Last week, NYCB said it was forced to stockpile much more cash for losses on offices and apartment buildings than analysts had expected. Its provision for loan losses surged to $552 million, more than 10 times the consensus estimate.
The bank also slashed its dividend by 71% to conserve capital. Companies are usually loath to cut dividends because investors favor firms that make steady payouts.
The NYCB results sent shares of regional banks tumbling because that group plays a relatively large role in the country’s commercial real estate market compared to the megabanks, while generally reserving less for possible defaults.
Shares of Valley National, another lender with a larger weighting to commercial real estate, have declined about 22% in the past week, for instance.
Institutions ‘stressed’
Emons noted that, much like during the March tumult, speculators have piled into trades betting that NYCB shares would decline further.
In particular, activity for put options that pay off if NYCB stock falls to $3 or lower have surged, he said. A put is a financial contract that gives the buyer the right to sell a stock at a predetermined price and within a specific time.
Source: CNBC
