When New York Community Bancorp (NYCB), a New York-area bank, announced a dividend reduction due to poor performance, its stock price plunged 37.7% on the 31st of last month (local time).
Banking stocks across the board suffered a sharp decline in stock prices, reminiscent of the bankruptcy of Silicon Valley Bank (SVB) in March of last year. The KBW Regional Banks Index fell 6%, its worst decline since Silicon Valley Bank collapsed in March. This stimulated anxiety about the banking crisis exposed to the commercial real estate crisis.
NYCB acquired Signature Bank, which went bankrupt following SVB last year, and its assets increased to $100 billion (KRW 133 trillion), making it the ‘winner of the banking crisis’. However, it recorded a loss of $252 million (340 billion won) in the fourth quarter of last year (October to December) and reduced dividends by nearly 70%, increasing investor anxiety. It fell more than 45% during the day, but the decline was reduced to close the day at 37.7%.
The reason behind NYCB’s turn to deficit was largely due to worsening credit outlook and increased loan losses due to continued high interest rates. In particular, it recorded an adjusted loss of $185 million (KRW 250 billion) due to the provision for loan losses amounting to $552 million (KRW 740 billion). The bank said that the increase in NYCB’s loan loss reserves was due to large-scale write-offs in the commercial real estate sector.
The bank emphasized that the increase in loan loss reserves was because its assets exceeded $100 billion and related regulations were strengthened, so the bank was not exposed to a systemic crisis. U.S. Wall Street analysts also assess that this appears to be a problem within NYCB itself. The New York Times (NYT) analyzed that unlike last year, when a bank run occurred and fear spread, NYCB deposits are showing relatively stability.
“NYCB-type warnings can be likened to cockroaches,” said Steve Sosnick, chief strategist at Interactive Brokers. “If you see one, it increases the anxiety that it is hiding somewhere unseen,” he told Reuters. On this day, U.S. Federal Reserve Chairman Jerome Powell virtually ruled out the possibility of an early interest rate cut in March, and as the market shifted its focus to a May cut, concerns about bank loan defaults grew, which is said to have incited market fears.
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Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.