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Key Takeaways
- Shares of New York Community Bancorp (NYCB) cratered after a surprise quarterly loss, dragging other regional bank stocks with them.
- NYCB swung to a $252 million net loss and cut its quarterly dividend by almost 70% to 5 cents a share.
- NYCB acquired certain assets of Signature Bank, which failed early last year, subjecting it to more stringent capital and liquidity requirements and regulatory scrutiny.
Regional bank stocks tumbled Wednesday, led by New York Community Bancorp Inc. (NYCB), which swung to a net loss for the fourth quarter and slashed its dividend as it prepares to meet higher regulatory standards after acquiring certain Signature Bank assets last March.
Shares of NYCB sank as much as 46% early Wednesday to $5.58, their lowest level since March’s regional banking crisis. At 1:20 p.m. ET, the stock had recovered a bit to $6.55. The broader regional banking sector followed NYCB lower, with the SPDR S&P Regional Banking ETF (KRE) down about 2% at the same time Wednesday.
NYCB posted a $252 million net loss in the latest quarter after earning $207 million in the third quarter and $172 million a year ago. Interest income declined 4% from the prior quarter to $1.45 billion, while interest expense rose 12% from the third quarter to $707 million. That, plus a 790% bulk-up in the bank’s provisions for credit losses, caused net interest income after the provisions to shrink 77% quarter-over-quarter.
For the full year, the bank’s net income totaled $2.37 billion, more than triple the profit earned from 2022. But stripping out one-time charges and a $2.2 billion windfall from its Signature Bank acquisition, net income declined 4% to $609 million.
The bank’s Signature transaction wasn’t without its drawbacks—the acquisition brought the bank’s assets to more than $100 billion, launching it into the ranks of Category IV banks. That designation brings with it more stringent capital and liquidity requirements and regulatory scrutiny.
As such, the bank cut its quarterly dividend to 5 cents a share, a more than 70% reduction.
“We believe this is the prudent decision as it will allow us to accelerate the building of capital to support our balance sheet as a Category IV bank,” Chief Executive Officer (CEO) Thomas Cangemi said in a press release.