Shares of New York Community Bancorp Inc. NYCB suffered a dramatic 22.15% decline during Tuesday’s trading session, plunging to levels not witnessed since April 1997.
Following the revelation of disappointing quarterly results last week, in which the bank reported a loss contrary to analyst expectations of a profit, investor concern has escalated around New York Community Bancorp.
Over the past week, the market capitalization of NYCB has more than halved from $7.45 billion to $3.16 billion.
After acquiring the troubled Signature Bank in the aftermath of the regional banking crisis in March 2023, New York Community Bancorp expanded its assets to above $100 billion. This substantial growth prompted more stringent regulatory and capital standards, reflective of its increased size and operational scope.
NYCB Hits Historic Low Reminiscent of April 1997
A report by Goldman Sachs underscored NYCB’s substantial exposure to the commercial real estate loan market, where CRE loans account for about 56% of the bank’s total loans.
According to a Monday Bloomberg report, NYCB’s decision to reduce its dividend and bolster cash reserves is a response to pressure from a prominent U.S. regulatory body.
NYCB has initiated a strategy to fortify its reserves, setting aside $552 million for potential loan losses, a figure significantly surpassing analyst expectations. As a consequence, the bank has implemented a drastic 70% cut in quarterly dividends, reflective of its cautious stance during this volatile market phase.
Bank of America Global Research expressed a bullish outlook on NYCB, asserting that while there is evident pressure on the bank’s CRE borrowers, the fourth quarter marked a series of events that resulted in a worse-than-expected outcome.
The bank’s rent-regulated portfolio boasts a 97% weighted average occupancy rate, with a significant portion of its office portfolio situated in Manhattan, indicating underlying strengths.
Despite the current situation, Bank of America Global Research maintains a Buy rating on NYCB, offering a price target of $8.50, almost double its Tuesday price.
During her testimony to the House Financial Services Committee on Tuesday, Treasury Secretary Janet Yellen expressed apprehensions about the commercial real estate sector and the exposure risks facing certain institutions.
“I’m concerned. I believe it’s manageable, although there may be some institutions that are quite stressed by this problem,” Yellen expressed.
The SPDR S&P Regional Banking ETF KRE concluded Tuesday with a 1.26% decline, closing at $46.97, marking the lowest daily close since Dec. 1, 2023. Simultaneously, New York Community Bank bore a 22.2% loss, wrapping up at $4.20, the lowest closure since April 1997.
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