What. A. Day.
Just when you think the big market-moving news is going to come from the Federal Reserve chair's testimony before Congress, blammo — here comes the Ghost of Banking Crisis Present.
ICYMI: Around noon, shares of New York Community Bancorp, a midsize lender that's been having some issues lately (more on that later), began tanking after the WSJ reported that the bank was nosing around for an equity capital infusion. In other words, NYCB needed cash to help plug a big old hole in its books.
That's a clear sign of distress, and Wall Street reacted swiftly, sending the stock down more than 40% so rapidly it triggered an automatic trading halt on the New York Stock Exchange.
A few hours later, NYCB said it had secured a $1 billion lifeline from a private equity firm led by none other than former Treasury Secretary Steve Mnuchin. The bank also announced its second CEO replacement in less than a week.
The cash infusion and the management shuffle seemed to turn the market around. NYCB's shares climbed out of their slump and finished the day up 8% (though it remains down 80% since the start of this year).
My colleague Elisabeth Buchwald has the latest.
What is going on?
Let's back up a bit. NYCB's stock has been spiraling for about a month, ever since the bank released a disastrous financial report revealing, among other things, a surprise loss of $252 million.
That got investors worried about NYCB and other banks with similar portfolios — specifically, lenders with outsize exposure to the increasingly shaky commercial real estate sector. Things got worse last week when NYCB disclosed it had found "material weakness" in its internal controls, prompting several credit downgrades.
All of this has triggered not-too-distant memories of the 2023 regional bank selloff, which began almost exactly one year ago with the frenzied collapse of Silicon Valley Bank.
What happens now?
The big thing to watch now are deposits. It's not yet clear whether the last month's turmoil has prompted clients to withdraw their money. In an update last month, the bank said that deposits were stable. But the stock has continued to take a beating since then, keeping NYCB's name in the headlines.
The bank last week delayed filing its annual report, citing more immediate issues to deal with. It now plans to release that report by March 15, and that should provide more information on what's happening with deposits.
RELATED
Comments
Post a Comment