Key Points:
- NYCB experiences a significant deposit outflow of $6 billion between February 5 and March 5, resulting in a 7% decline in its deposit base to $77 billion.
- The bank’s stock sees heightened volatility, opening 13% higher on Thursday after a substantial decline of more than 40% on Wednesday.
- The bank reports an unexpected loss of $252 million in the last quarter, leading to a downgrade to junk status by Moody’s and Fitch.
- NYCB responds to financial challenges by slashing its dividend to one penny per share, following a previous reduction in January.
New York Community Bank (NYCB) has witnessed a substantial outflow of deposits, with customers withdrawing $6 billion between February 5 and March 5, resulting in a 7% decline in the bank’s deposit base to $77 billion. During an investor conference call on Thursday, the bank provided these updated figures following its announcement of securing a $1 billion investment from Liberty Strategic Capital, led by former Treasury Secretary Steven Mnuchin, and other private equity firms.
Shares of New York Community Bank experienced significant volatility, opening 13% higher on Thursday after a tumultuous day on Wednesday when the stock plummeted more than 40% at one point. The bank’s recent challenges began when it reported an unexpected loss of $252 million in the last quarter, starkly contrasting the $172 million profit recorded in Q4 2022. This led to a sharp decline in the stock, reaching its lowest level since 1997.
New York Community Bank has been grappling with a series of setbacks, including being downgraded to junk status by Moody’s Investors Service and Fitch Ratings. The downgrade is particularly noteworthy as it may prompt depositors to seek banks with higher credit ratings deemed “investment grade.”
Alessandro DiNello, NYCB’s outgoing CEO, emphasized that there weren’t significant changes in the bank’s deposit levels before disclosing “material weakness” in the company’s controls. However, after a Wall Street Journal story on Wednesday indicated that the bank was actively seeking a cash infusion, withdrawals noted an uptick. The situation stabilized after the $1 billion investment announcement, with DiNello noting that “it was back to normal.”
In response to the challenging financial circumstances, New York Community Bank announced a series of measures, including a dividend cut. The bank revealed a dividend reduction to one penny per share, following a prior announcement in January when it lowered the dividend from $0.17 to $0.05.
The $1 billion investment from Liberty Strategic Capital and other private equity firms is a crucial lifeline for New York Community Bank amidst its financial woes. While the bank has recently faced a turbulent period, capital injection is expected to provide stability and support its efforts to navigate the challenges.
