Almost a year ago to date, financial markets had a mini freeze over some high profile examples of “liquidity issues” in the banking sector.
Our sense was liquidity issues can be readily plugged by a Federal entity with unlimited funds. What is harder and more insidious is the slow moving dead horse of credit moving through the banking python. Not every bank is the same and smaller banks are often pools of geographic credit intensity, so there is some credence to “their crap is not our crap.” But we think this press release will become more relevant and numerous as the year goes on.
NY Community Bancorp Plunges a Record 45% After Dividend Cut
By Steve Dickson
(Bloomberg) — New York Community Bancorp, the regional lender that purchased deposits from Signature Bank last year, fell a record 45% after reporting a surprise loss for the fourth quarter and a cut to its dividend.
The bank lowered its quarterly payout to shareholders to 5 cents. Analysts had predicted the dividend would remain at 17 cents. A worsening credit outlook contributed to the unexpected loss, as the company boosted its loan-loss provision more than expected.
“We recognize the importance and impact of the dividend reduction on all of our stockholders, and it was not made lightly,” Chief Executive Officer Thomas Cangemi said in a statement Wednesday. “While these necessary actions negatively impacted our fourth-quarter results, we are confident they better align our larger organization with our new peers and provide a solid foundation going forward.”
The loss for the final three months of last year was $252 million, compared with a $206 million profit analysts had predicted. Revenue of $886 million fell short of expectations for almost $932 million.
Shares of the company plunged 45% to $5.74 at 9:31 a.m. in New York.
The purchase of Signature Bank’s deposits moved New York Community Bancorp into a regulatory category that requires additional capital levels. The company said that was responsible for the dividend cut and the boost to its provision for loan losses. The provision was $552 million, compared with analysts’ estimates of just $45 million.
Management had previously said asset quality was strong, so “something has clearly changed in their tone,” Jon Arfstrom, an analyst at RBC Capital Markets, said in a note to clients. “This was a material negative surprise.”
Signature was among three US banks that collapsed in rapid succession last year as they tried to adjust to a jump in interest rates that devalued their holdings. New York Community Bancorp, through its Flagstar Bank unit, agreed to purchase $38 billion of Signature’s assets, including $25 billion in cash and about $13 billion in loans, from the Federal Deposit Insurance Corp.
Read the story at Bloomberg.com.
