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New York Community (NYCB) Cuts Dividend, Sees Deposit Outflow
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After raising $1.05 billion from a group of investors, New York Community Bancorp (NYCB - Free Report) has taken drastic measures to shore more liquidity, which has been weighed down by deposit outflows and higher provisions due to high exposure to the commercial real estate sector.
Specifically, the company has slashed its quarterly dividends by 80% to a penny. This comes after the lender reduced dividends by 71% on Jan 30, 2024. The company announced the dividend cut to build capital.
NYCB also noted a 5% drop in its deposits since the 2023 end through Mar 5, 2024. As of the date, its deposits stood at $77.2 billion, down from $81.4 billion as of the December end. It also noted an increase in retail deposits from the end of 2023, whereas total uninsured deposits (excluding collateralized and internal accounts) of $15.3 billion accounted for 20% of the total deposits. Given the concerns, the company is expected to witness higher deposit costs, which could weigh down on its net interest margin.
Regarding the $1.05-billion equity raise, New York Community will sell 59,750,000 common shares for $2 per share; and 192,062 and 273,188 convertible preferred shares of series B and series C, respectively, with a conversion price of $2 per share. This aside, investors will receive seven-year warrants to purchase non-voting, common-equivalent stock of NYCB shares worth $315 million. This will be at an exercise price of $2.50 per share, indicating a 25% premium on the price paid on common stock of $2.
These efforts will likely aid the company to regain confidence in its stock. Its credit grade was recently downgraded to junk by Moody’s Investors Service, a division of Moody’s Corporation (MCO - Free Report) . In particular, NYCB’s long-term issuer rating has been downgraded two notches below investment grade to Ba2. MCO’s rating downgrades come after the regional bank shocked shareholders by posting unexpected commercial real estate loan losses.
Last week, NYCB, which acquired parts of the failed Signature Bank in early 2023, set aside bigger-than-expected provisions for potential bad loans mainly due to its commercial real estate exposure.
After the bank posted the unexpected huge fourth-quarter loss, there has been a significant drop in faith regarding its ability to repay debt holders. Shares of the company have declined to their lowest level in the past 27 years.
Over the past six months, NYCB shares have lost 69.1% compared with the industry’s 2.6% decline.
Image Source: Zacks Investment Research
Currently, NYCB carries a Zacks Rank #5 (Strong Sell).
Stock to Consider
A better-ranked bank stock is Simmons First National Corporation (SFNC - Free Report) .
Simmons First’s earnings estimates for the current year have moved north by 7.6% in the past 60 days. The company’s shares have gained 15.9% over the past three months. At present, SFNC sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
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New York Community (NYCB) Cuts Dividend, Sees Deposit Outflow
After raising $1.05 billion from a group of investors, New York Community Bancorp (NYCB - Free Report) has taken drastic measures to shore more liquidity, which has been weighed down by deposit outflows and higher provisions due to high exposure to the commercial real estate sector.
Specifically, the company has slashed its quarterly dividends by 80% to a penny. This comes after the lender reduced dividends by 71% on Jan 30, 2024. The company announced the dividend cut to build capital.
NYCB also noted a 5% drop in its deposits since the 2023 end through Mar 5, 2024. As of the date, its deposits stood at $77.2 billion, down from $81.4 billion as of the December end. It also noted an increase in retail deposits from the end of 2023, whereas total uninsured deposits (excluding collateralized and internal accounts) of $15.3 billion accounted for 20% of the total deposits. Given the concerns, the company is expected to witness higher deposit costs, which could weigh down on its net interest margin.
Regarding the $1.05-billion equity raise, New York Community will sell 59,750,000 common shares for $2 per share; and 192,062 and 273,188 convertible preferred shares of series B and series C, respectively, with a conversion price of $2 per share. This aside, investors will receive seven-year warrants to purchase non-voting, common-equivalent stock of NYCB shares worth $315 million. This will be at an exercise price of $2.50 per share, indicating a 25% premium on the price paid on common stock of $2.
These efforts will likely aid the company to regain confidence in its stock. Its credit grade was recently downgraded to junk by Moody’s Investors Service, a division of Moody’s Corporation (MCO - Free Report) . In particular, NYCB’s long-term issuer rating has been downgraded two notches below investment grade to Ba2. MCO’s rating downgrades come after the regional bank shocked shareholders by posting unexpected commercial real estate loan losses.
Last week, NYCB, which acquired parts of the failed Signature Bank in early 2023, set aside bigger-than-expected provisions for potential bad loans mainly due to its commercial real estate exposure.
After the bank posted the unexpected huge fourth-quarter loss, there has been a significant drop in faith regarding its ability to repay debt holders. Shares of the company have declined to their lowest level in the past 27 years.
Over the past six months, NYCB shares have lost 69.1% compared with the industry’s 2.6% decline.
Image Source: Zacks Investment Research
Currently, NYCB carries a Zacks Rank #5 (Strong Sell).
Stock to Consider
A better-ranked bank stock is Simmons First National Corporation (SFNC - Free Report) .
Simmons First’s earnings estimates for the current year have moved north by 7.6% in the past 60 days. The company’s shares have gained 15.9% over the past three months. At present, SFNC sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.