New York Community Bancorp’s Surprise Loss Sends Regional Bank Stocks Tumbling
New York
CNN
Regional bank stocks are back in the hotseat thanks to a truly horrific financial report from New York Community Bancorp.
On Wednesday, the regional lender reported a surprise loss of $252 million last quarter compared to a $172 million profit in the fourth quarter of 2022. The company reported $552 million in loan losses, a steep increase from $62 million the previous quarter.
That caused shares of New York Community Bancorp to drop 38% in one day, and the stock hit a 25-year low.
New York Community Bancorp’s CEO Thomas Cangemi stated that the company’s poor quarter is a product of acquiring close to $40 billion in assets, including $13 billion worth of loans, from now-failed Signature Bank, one of the regional banks that collapsed during last year’s crisis.
The acquisition pushed New York Community Bancorp’s total assets above $100 billion, triggering increased capital requirements to protect against future losses. However, this imposition limits the amount of money banks can loan out.
Over time, Cangemi aims to “rightsize” the business. Meanwhile, immediate measures like slashing dividends are necessary to free up funds, he informed analysts on a Wednesday morning call.
New York Community Bancorp declined to comment beyond its earnings call.
The fallout from the bank’s financial report also affected other regional bank stocks, causing the KBW Regional Banking Index to close down by 6% on Wednesday.
This decline, however, is minor compared to the devastating tailspin regional bank stocks encountered last spring. And smaller, regional banks have significantly recovered from the heightened stress resulting from the three bank failures last year.
Nevertheless, New York Community Bancorp’s challenges may inflict fresh wounds on the industry.
Despite the troubled quarter, there is reason to believe that the bank is not on the brink of collapse. Deposits last quarter were down just 2% and declined by even less when excluding the custodial deposits connected to the Signature Bank acquisition.
