Finance & Economics

Shares of NYCB Demonstrate Decline

The share price of New York Community Bank (NYCB) last Monday, March 4, showed a drop of 23%.

Shares of NYCB Demonstrate Decline

The mentioned financial institution’s securities cost is currently at its lowest level since 1996. Shares of NYCB, which is one of the most well-known regional players in the American banking sector, are on a difficult recovery path. The cost of securities of a financial institution is under pressure from the fact that last week a lender’s statement was published declaring a significant weakness in the organization’s control system. NYCB also reported that the mentioned problems caused $2.4 billion in shareholder losses. The corresponding negative indicator was recorded in the last quarter.

On Friday, March 1, the share price of the financial institution showed a decrease of more than 25%. This negative dynamic was recorded after the bank reported significant developments, including a shakeup in the leadership of NYCB. As a result of the personnel changes, Alessandro DiNello, the former executive chairman of the financial institution, became the new president and CEO of the bank.

Pressure on NYCB shares intensified after Fitch Ratings downgraded the lender’s debt quality to junk status on Friday. Moody’s Investors Service has further downgraded the financial institution’s rating into junk territory.

Last week, the bank announced its decision to postpone the publication of its mandatory annual financial disclosure, known as 10-K. In this context, the lender noted its intention to focus on solving the identified problems. The bank plans to publish its financial disclosure by March 15. If the lender does not provide additional data, K-10 will be the last source of information about depositors’ actions, including possible withdrawal of funds.

The current moves and decisions of NYCB have certain unpleasant and somewhat disturbing similarities with the practice of First Republic Bank. The specified lender also postponed the publishing of quarterly earnings reports, shortly after which the bankruptcy of this financial institution occurred. At the same time, it is worth noting that the similarity of situations does not mean their identity and is not a guarantee of repeating the experience of the past.

About a month ago, NYCB announced a reduction in dividends. The management of the financial institution made the appropriate decision after losses of $252 million were recorded in the fourth quarter of last year. This result is evidence of a significant deterioration in the bank’s position. For the fourth quarter of 2022, the financial institution recorded a profit of $172 million. After the negative reporting for the last quarter of 2023, the tendency of the fall in the cost of the bank’s shares began. The corresponding indicator is currently at its lowest level since 1997.

At the same time, the management of the financial institution, against the background of news in which there are no signs of optimistic prospects, attempted to reassure depositors and investors. As part of these efforts, the bank stated that deposits were stable in the fourth quarter of last year and even showed an increase, which, however, was moderate. The indicator of the share price of a financial institution indicates that attempts to inspire optimism or at least reduce the level of pessimism have not been successful.

Currently, there are questions about the reliability of NYCB. The management of the financial institution identified problems based on the results of an internal audit of loans conducted after ascertaining the inefficiency of supervision, risk assessment, and monitoring of activities. In this case, extremely unpleasant chronological parallels also arise. The statements about the negative state of affairs contained in the NYCB reports are similar to statements that were revealed in similar documentation by Silicon Valley Bank and Signature Bank, which went bankrupt last year. Against this background, hopes for a positive mood from investors and depositors are in vain.

Since the beginning of the current year, the value of NYCB securities has shown a decrease of more than 70%. The problems of this financial institution have a certain impact on the shares of other regional lenders. For example, Valley National Bank (VLY) securities fell in price by 5.6% on Monday. The KBW regional banking index decreased by 0.7%.

KBW analyst Chris McGratty says that NYCB could raise new deposits through mediation, issue new debt, or borrow from the Federal Reserve, but this is likely to be an action involving significant costs. The expert also believes that the bank will do everything possible to preserve existing deposits, but financing the balance sheet may become prohibitive over time.

As we have reported earlier, Barclays to Return £10 Billion to Investors in Overhaul.

Serhii Mikhailov

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Serhii’s track record of study and work spans six years at the Faculty of Philology and eight years in the media, during which he has developed a deep understanding of various aspects of the industry and honed his writing skills; his areas of expertise include fintech, payments, cryptocurrency, and financial services, and he is constantly keeping a close eye on the latest developments and innovations in these fields, as he believes that they will have a significant impact on the future direction of the economy as a whole.