NYCB Reports a 7% Decrease in Deposits and Reduces Dividend to 1 Cent

New York Community Bank (NYCB) has reported a 7% decrease in deposits and has reduced its quarterly dividend to just 1 cent per share, down from 5 cents. These developments come after Moody’s Investors Service downgraded the bank’s credit ratings to junk. NYCB also experienced a turbulent period which saw two CEO changes, rating agency downgrades, and deepening losses. However, the bank received a significant capital injection of over $1 billion from investors led by former Treasury Secretary Steven Mnuchin’s Liberty Strategic Capital. This injection has raised hopes that NYCB will be able to address concerns regarding its exposure to New York-area multifamily apartment loans and the “material weaknesses” in its loan review process.

Mnuchin, in an interview with CNBC, expressed his confidence in NYCB’s future prospects, stating that the capital injection strengthens the bank’s franchise and allows any issues with its loans to be resolved. He sees an opportunity to turn NYCB into an attractive regional commercial bank. Mnuchin conducted extensive due diligence on NYCB’s loan portfolio and identified the New York office loans as the biggest problem. However, he expects the bank to build reserves over time.

Incoming CEO Joseph Otting, a former comptroller of the currency, outlined the bank’s plans to strengthen its capital and liquidity levels while reducing its concentration in commercial real estate loans. Analysts suggest that NYCB may need to sell assets, build reserves, and take write-downs to achieve this. The bank is also evaluating whether it should reduce its assets below the $100 billion threshold to avoid additional regulatory scrutiny.

Despite the positive news of the capital injection, Wells Fargo analyst Mike Mayo cautions that the cycle for commercial real estate losses is just beginning, which may pose further challenges for lenders as loans come due over the next year.

Overall, while NYCB has faced significant challenges in recent months, the capital injection led by Mnuchin’s Liberty Strategic Capital provides hope for the bank’s future. With plans to strengthen its capital and liquidity levels and reduce its concentration in commercial real estate loans, NYCB aims to overcome its current difficulties and position itself as an attractive regional commercial bank. However, the potential for further challenges in the commercial real estate market remains a concern.