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New York Community Bancorp’s stock price plummeted Wednesday after the financial company that acquired the failed Signature Bank during last year’s regional banking turmoil cut its dividend and reported an unexpected loss in an effort to recapitalize itself. fell sharply.
NYCB was seen as one of the winners of the 2023 crisis that sank Signature, Silicon Valley Bank, and First Republic. Last March, the suburban New York-based financial institution acquired the majority of Signature’s deposits and just over a third of its assets, including about $13 billion in loans, in a deal brokered by the Federal Deposit Insurance Corporation. .
Investors at the time pushed NYCB stock higher.
Those gains were completely erased after NYCB released its fourth quarter results on Wednesday. The regional bank posted a loss of $260 million in the final three months of 2023, down from a profit of $164 million a year earlier. The bank specifically blamed higher expected loan losses, many of which stemmed from loans related to office buildings, bank executives said.
NYCB CEO Thomas Cangemi was asked on a call with analysts about the Signature acquisition and the reason for unexpected loan losses. He said the bank would cut its dividend to maintain compliance with banking regulations after the acquisition brought the bank’s assets to more than $100 billion and tightened minimum capital requirements. He said there was.
NYCB stock was down 36% as of midday, having previously fallen as much as 46%. Other local bank stocks also fell, with the KBW Regional Bank Index down more than 3%.
Regarding losses, Cangemi said the bank spent the fourth quarter stress testing the commercial real estate loan portfolio acquired at Signature and raised its estimate of expected losses on office loans.
Kangemi said the bank “focused on the weaknesses of general offices across the country.” And we took a hard look at our office portfolio given the interest rate increases we’ve experienced over the past few quarters, and we also looked at payment shocks and interest rate shocks. ”
CFRA analyst Alexander Yokum downgraded NYCB’s stock to “hold” on Wednesday, writing, “The decline in our view reflects a decline in confidence in management’s ability to integrate recent acquisitions in an efficient manner. It reflects that.”
NYCB’s need to raise cash and other liquid assets to meet increased regulatory burdens has reduced its net interest margin, or the difference between loan income and funding costs, by nearly half a percentage point. said. The bank also said that the integration of the Signature acquisition will take longer than expected and may not be completed until sometime next year.
Cangemi also maintained that the acquisition was progressing smoothly despite the longer-than-expected integration period. “In terms of Signature and the team we’ve built, they’ve done a phenomenal job and had a great year, as you can see in my prepared comments,” Cangemi told analysts. he said.
