NYCB Recovers from Near Collapse with $1B Investment Amid Looming End of Federal Bank Aid
Summary:
New York Community Bancorp (NYCB) shares plummeted by 42% before rebounding following the announcement of a $1 billion investment. The bank faced turbulence due to weak Q4 financial results, decreased dividends, and concerns over losses from non-performing commercial real estate loans. Initiated following several bank failures, the Federal Reserve's Bank Term Funding Program (BTFP) is set to end a week following NYCB's rocky trading day. Amid the U.S. banking crisis, Bitcoin prices shot up by 40% when the BTFP was launched. Comparisons were drawn between the current banking predicament and the 2008 financial crisis triggered by banks.
New York Community Bancorp (NYCB) shareholders experienced an intense rollercoaster of market activity on Wednesday as the bank's stock plunged by 42% before bouncing back following an announcement that the bank had secured a $1 billion investment. NYCB, a major regional bank in the U.S. with over $100 billion in assets, purchased the former crypto-friendly Signature Bank after its failure in March 2023. Nevertheless, NYCB encountered turbulent times due to its underwhelming financial performance in Q4, a decrease in its quarterly dividends, and worries revolving around potential losses from non-performing commercial real estate loans.
NYCB's shares dropped by more than 42% to $1.76 on March 6 and trading was put on hold awaiting further news. Trading recommenced a few hours later and share prices soared following announcement of over $1 billion strategic equity investment, an act presumably aimed at reinstating investor faith. The prices rose to $4 before dropping to $3.40 in the late trading hours, according to MarketWatch.
Former Treasury Secretary Steven Mnuchin and new NYCB board member led the capital infusion and stated, "The over $1 billion investment into the bank ensures we have ample capital if we need to ramp up reserves in the future to match or exceed the coverage ratio of NYCB's large bank contemporaries."
A wrap-up to NYCB's tumultuous day comes just a week before the Federal Reserve's bank rescuing program, the Bank Term Funding Program (BTFP), is due to conclude on March 11. Initiated in March 2023 after several notable bank failures, the BTFP aimed to readily provide additional funding to "Pre-qualified deposit institutions" to ensure they can service all their depositors.
Since its inception, the U.S. central bank has funneled $164 billion to distressed banks, as per data from the St. Louis Fed. As reported, Bitcoin prices shot up by 40% in March 2023, when BTFP was rolled out, following the U.S. banking crisis and the resulting fall of Signature Bank and Silicon Valley Bank.
On March 7, Balaji Srinivasan, an angel investor and author, drew parallels between the current banking fiasco and the 2008 financial crisis triggered by banks. He stated, "This situation mirrors 2008 when everyone was convinced the mortgage-backed securities were AAA. But now, the new risky assets are the treasuries themselves.
Published At
3/7/2024 7:35:34 AM
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