New York Community Bancorp drops 40% and is on hold as troubled bank reportedly looks to cash in
Share difficulties New York Community Bancorp. fell more than 40% on Wednesday amid reports that the regional bank was looking to inject cash.
Reuters and the Wall Street Journal reported on Wednesday that the bank is looking for outside investors for cash to shore up its balance sheet. NYCB did not immediately respond to a request for comment from CNBC.
Shares were paused on the pending news as shares fell 42%.
NYCB shares fell sharply on Wednesday.
The bank’s shares fell sharply the day before the report. The stock is now under $2 per share after starting the year above $10.
The cash injection would be the latest development in NYCB’s tumultuous start to the year. The bank revealed in late January that it had significantly increased the provision for potential loan losses on its balance sheet, with exposure to commercial real estate a potential problem. hidden. Right after that was Moody’s downgrades investor services The bank’s credit rating is junk and NYCB named former Flagstar Bank CEO Alessandro DiNello as executive chairman.
Then last week, NYCB revealed that it had “determined material weakness in the company’s internal controls related to internal loan reviews” and announced that DiNello will assume the position of CEO.
The questions surrounding NYCB are reminiscent of those surrounding Silicon Valley Bank, Signature Bank and First Republic before all three failed in the spring of 2023. They are among several regional banks facing trouble as higher interest rates push up the value of older Treasury holdings and cause some depositors to move their accounts elsewhere.
With the US economy continuing to show incredible strength and inflation still above the Federal Reserve’s 2% target, traders have tempered expectations for interest rate cuts this year. . A higher interest rate environment for longer could put pressure on banks and commercial real estate, which is the primary business of NYCB and many other lenders in the region.
The struggles for NYCB could catch regulators and investors alike off guard. Regional lender buy Signature Bank was largely taken out of receivership by the Federal Deposit Insurance Corporation last March.
