When New York Community Bancorp pounced to seize the majority of the failing Signature Bank’s assets and surged to over $100 billion in assets less than a year ago, it appeared to be among the major winners of a crisis among its peers.
The bank, which has 420 branches, announced a $252 million loss in its most recent quarter, cut its dividend, and set aside a sizable amount of reserves to cover any future losses. These actions came at a cost to the bank on Wednesday. Its stock fell 38% to a 25-year low, causing the average share price of other regional banks to fall by 6%.
Although the bank is now significantly larger than it was prior to the Signature acquisition, New York Community Bancorp attempted to put on a brave front with the news by titling the accompanying statement “Record Results for 2023.” However, analysts and investors swiftly pointed out the bank’s shortcomings.
It was a jarring reminder of the turmoil that occurred in March of last year, when issues at Silicon Valley Bank spread throughout the sector and brought down banks like Signature, which was well-known for lending bitcoin, real estate, and legal services. From federal receivership, New York Community Bancorp purchased a large portion of Signature
While some of New York Community Bancorp’s issues are directly related to its acquisition of Signature, others are the result of its own actions. Executives at the bank announced that, in part due to a deteriorating investment climate for office space, they would need to set aside additional funds to cover losses on loans in the commercial real estate sector. There was “no real property activity happening right now,” according to one executive.
When contacted for comment, the bank remained silent.
During the bank’s routinely scheduled call to assess earnings, analysts grilled the officials, and the questioning became especially pointed. J.P. Morgan’s Steven Alexopoulos questioned why the bank would not provide additional information regarding the impact on its potential future profitability.
Give us the number, please. Alexopoulos enquired. “This is a 25-year low for your stock. I doubt that you’re content with this. “I don’t understand why you wouldn’t use this chance to level-set expectations,” he continued.
Executives often refrained from providing details, attributing their problems to rules requiring banks with assets above $100 billion to maintain a higher level of reserves than smaller lenders, such as New York Community Bancorp. Thomas R. Cangemi, president of the bank, stated, “There’s no question that this was a difficult decision as a firm, but clearly necessary,” in reference to the dividend reduction.
There is a key distinction between the crisis of the previous year and the current one affecting New York Community Bancorp: Deposits at the bank seem to remain steady overall. In the fourth quarter, deposits decreased by 2% to $81.4 billion
