© Reuters. FILE PHOTO: A screen displays the trading information for New York Community Bancorp on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., January 31, 2024. REUTERS/Brendan McDermid/File Photo
By Manya Saini, Niket Nishant and Tatiana Bautzer
(Reuters) -New York Community Bancorp (NASDAQ:)’s incoming CEO said he was working on a new business plan after the embattled lender got a $1 billion lifeline from investors, cut its dividend for the second time since January and revealed a 7% decline in deposits.
The bank’s shares rose 12% on Thursday after swinging between gains and losses over the last two days, with periodic trading halts that underscored lingering uncertainty about its finances.
Joseph Otting, former Comptroller of the Currency in the Trump administration, was named NYCB’s CEO on Wednesday as part of a $1 billion capital injection from a group of investors that included former Treasury Secretary Steven Mnuchin.
Otting and Non-Executive Chair Alessandro DiNello will present a new business plan for the bank in late April, the new CEO said on a call with analysts on Thursday.
The lender has been trying to arrest a persistent stock rout that has wiped billions off its market value, almost a year after the collapse of Silicon Valley Bank and Signature Bank (OTC:) ignited widespread concerns over the health of the sector.
NYCB has also pledged to reduce its exposure to the commercial real estate (CRE) industry, after taking huge provisions in the fourth quarter for potential bad loans tied to the sector. Empty office buildings in the post-pandemic era and steep borrowing costs have worsened worries of debt defaults.
Top executives on Thursday did not answer questions on the portfolios that NYCB could divest to reduce its CRE footprint and raise capital, but Otting said bidders from “outside the banking industry” were interested in buying the assets.
A surprise quarterly loss and a 70% reduction of its dividend in January, followed by a disclosure last week that the bank had found “material weakness” in internal controls, has hammered NYCB’s stock.
DEPOSIT DECLINE
NYCB reported total deposits of $77.2 billion as of March 5, lower than $83 billion a month ago. About 19.8% of the deposits were uninsured.
Compared with peers, it has the lowest concentration of uninsured deposits and has disclosed it has enough liquidity to offer its customers expanded deposit insurance.
DiNello said some people lined up to withdraw their deposits on Wednesday after media reports said NYCB was seeking capital, but that stabilized later in the afternoon once the company’s press release was out.
The bank also reduced its quarterly dividend to 1 cent per share, lower than the 5 cents it announced in January.
While most analysts had cheered the capital injection and management shuffle, some remain concerned about NYCB’s future, saying the bank still has a long way to go to repair the damage.
At least three brokerages cut their price targets on the stock after the deal was announced.
“While this deal provides a much-needed lifeline to NYCB, it is tremendously dilutive to common shareholders,” analysts at Wedbush said. In exchange for their capital, NYCB’s investors bought common shares at $2 each, along with preferred stock.
The bank’s new CEO Otting, the third to take the top job in weeks, is a banking industry veteran who served as the 31st Comptroller of the Currency. He is credited with reviving IndyMac, a mortgage lender Mnuchin bought out of the Federal Deposit Insurance Corporation’s receivership in 2009 with an investor group.
“Even the link with the OCC (Office of the Comptroller of the Currency) may not be the glowing endorsement that it seems, given that it was the OCC waived through NYCB’s acquisition spree that has done so much to get it in trouble in the first place,” said Russ Mould, investment director at AJ Bell.
NYCB’s acquisition of Flagstar Bank in 2022 and Signature Bank’s assets last year pushed its assets above $100 billion, subjecting it to tougher regulations imposed on lenders of that scale.