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Shares of New York Community Bancorp plunged on Wednesday after the lender that bought failed Signature Bank in the middle of last year’s regional banking turmoil cut its dividend to boost its capital and reported a surprise loss.
NYCBThe 2023 crisis, which brought down Silicon Valley Bank, First Republic and Signature Bank in 2023, was seen as a win for the institution. The suburban New York-based institution last March acquired most of Signature’s deposits and just over a third of its assets including nearly $13bn in loans, in a deal arranged by the Federal Deposit Insurance Corp.
Investors of the time propelled Shares of NYCB are higher.
These gains were completely wiped out after NYCB announced its fourth-quarter earnings on Wednesday. The gains were completely wiped out after NYCB announced its fourth-quarter earnings on Wednesday. Regional bankIn the final quarter of 2023, the bank lost $260mn. This is down from $164mn gained in the same period a year earlier. The bank attributed the increase in expected loan losses to a number of loans that were tied to office buildings.
Thomas Cangemi was NYCB’s chief executive when he was asked about the Signature acquisition, and the reason behind the unexpected loan losses. He said the bank was cutting its dividend in order to remain compliant with banking regulations as a result of the takeover, which pushed the bank’s assets over $100bn and into a stricter requirement for the minimum amount of capital it must hold.
Shares of NYCB were down 36 percent at midday after falling as much as 46 percent earlier. Other regional bank shares also fell, as the KBW Regional Bank Index declined by more than 3 percent.
Cangemi, in response to the question of losses, said that the bank has spent the fourth-quarter stress-testing a portion of its commercial real property loan portfolio which it acquired from Signature. They have also raised their estimate of expected losses for office loans.
Cangemi said the bank looked at “the general office weaknesses throughout the country. And we really did a deep dive in the office portfolio as well as thinking through payment shock and interest rate shock given the rise of interest rates that we’ve experienced over the past few quarters.”
Alexander Yokum, an analyst at CFRA, downgraded NYCB’s shares to “hold” on Wednesday, saying: “Our diminished view reflects falling confidence in management’s ability to integrate its recent acquisitions in an efficient manner.”
NYCB reported that its net interest rate, or the difference between its loans profits and funding costs, has fallen by almost half a percentage because it had to raise cash, and other liquid assets, to meet increased regulations. The bank said that the integration of the Signature purchase would take longer than anticipated and may not be complete until next year.
Cangemi said that the acquisition was proceeding well despite the longer integration period than expected. “In respect to Signature and the teams that we’ve built, they’re doing a phenomenal job as indicated in my prepared remarks, they’ve had a great year,” Cangemi told analysts.