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New York Community Bank headquarters in Hicksville, New York.
new york
CNN
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Some of the first signs of banking stress during the crisis that unfolded last year were reflected in the plummeting stock prices of Silicon Valley Bank, Signature Bank, and First Republic Bank. They all ultimately failed.
Therefore, New York Community Bancorp (new york cb) will suffer the same fate after its stock price fell 60% over the past week.
There’s now more pressure on the bank after Moody’s Investors Service downgraded the bank’s credit rating to junk status on Tuesday night. The company’s stock price fell another 15% in after-hours trading.
“NYCB’s rating could be further downgraded if it faces a loss of depositor confidence that threatens NYCB’s liquidity resources,” the rating agency said.
The initial trigger for the decline was last week’s announcement by the bank that it would cut its dividend. Previous unexpected loss of $252 million The company also reported $552 million in loan losses, primarily due to deterioration in commercial real estate loans. Its value has plummeted as more people work from home and companies give up office space.
NYCB CEO Thomas Cangemi also blamed the bank’s poor quarter on the acquisition of $40 billion in assets from Signature Bank, bringing NYCB’s total assets to more than $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.
Given this, investors’ knee-jerk reaction to the New York Central Bank’s earnings report is understandable and does not imply that the bank is at risk of failure, Wedbush Securities said. said David Chiaverini, managing director of banking.
However, he said that concerns are starting to arise as stock prices continue to fall significantly. “As stock prices fall, the likelihood of banks going into receivership increases.” In other words, banks may eventually fail.
Uninsured depositors, or customers with more than $250,000 in a single account, may be more worried that banks will run out of funds to cover their deposits.
As of the third quarter of last year, uninsured deposits accounted for about 40% of NYCB’s total deposits, according to the company’s financial report. This is a fairly large market share compared to Signature Bank and Silicon Valley Bank, which were about to disappear.
While it may be scary to see a bank’s stock price plummet, it’s not the best measure of a bank’s viability.
The best source of information in this regard is bank deposit flows, Chiaverini said.
Deposits were down just 2% last quarter, and the decline was even smaller if you exclude deposits in custody related to the Signature Bank acquisition. However, things may have changed significantly since last week’s earnings report.
Bank of America analysts said in a note Friday that feedback they received from management “indicates that the bank is not experiencing unusual deposit inflows or outflows.”
However, NYCB has not provided official updates on deposit flows and did not respond to CNN’s inquiries.
The bank is likely to file the required annual report within the next month, based on the timing of previous filings. The report will provide further insight into banks’ deposit flows.
On Tuesday, Treasury Secretary Janet Yellen said: told the lawmakers: “We are in contact with the supervisory authorities and are closely monitoring the current banking stress.” He added that he did not want to comment on individual banks.
“Commercial real estate is an area that we have long recognized can pose financial stability risks and losses to the banking system,” Yellen said during a House Financial Services Committee hearing.
The Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency declined to comment.
