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New York Community (NYCB) to Sell Warehouse Loans To JPM
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New York Community Bancorp, Inc. (NYCB - Free Report) has entered into a commitment letter with JPMorgan Chase & Co. (JPM - Free Report) to sell around $5 billion in mortgage warehouse loans to the latter.
Sale proceeds will be reinvested into cash and securities, thereby bolstering the company’s liquidity profile. With this, on a pro-forma basis, the ratio of cash and securities to total assets is projected to improve to 24% from 20% at Mar 31, 2024.
Upon closing, NYCB expects the transaction to increase the CET1 capital ratio by 65 basis points. This will result in a pro-forma CET1 capital ratio of 10.8% as of Mar 31, 2024. Also, its pro-forma loan-to-deposit ratio is projected to fall to 104% from 110% at first-quarter 2024 end.
The move is in line with the company’s focus to improve capital, liquidity and loan-to-deposit metrics.
As of first-quarter end, it had total liquidity of $28.6 billion consisting of cash held on balance sheet of $15.5 billion and $13.1 billion borrowing capacity and high-quality liquid assets
NYCB management noted, “The mortgage team at Flagstar built a first-class warehouse business, which is reflected in our ability to execute on an accretive transaction with JP Morgan. The mortgage business remains an important business for the Company and we will continue to provide our mortgage customers and partners the same great service that they have come to expect from Flagstar."
The transaction is subject to completion of due diligence, negotiation of definitive documentation, and satisfaction of customary closing norms. The sale is expected to close in third-quarter 2024.
Markedly, the sale underlines the company’s efforts to shrink its balance sheet by reducing non-core assets. Also, NYCB is aiming to diversify its loan portfolio. The bank’s strategic target is to reduce its commercial real estate portfolio from $47 billion to around $30 billion while building a robust middle market relationship banking franchise. Efforts to improve funding by growing core deposits will improve deposit mix in the upcoming period.
Over the past six months, shares of NYCB have declined 58.3% while JPM shares rallied 34.6%.
Truist Financial (TFC - Free Report) completed the divestiture of the remaining 80% stake in its insurance subsidiary – Truist Insurance Holdings ("TIH") – to Stone Point Capital and Clayton Dubilier & Rice. Mubadala Investment Company and co-investors also participated in the deal.
Following this, TFC executed a balance sheet repositioning strategy. This will help the company generate higher revenues this year than previously expected.
Last month, The Bank of New York Mellon Corp. (BK - Free Report) entered into an agreement with Computershare to divest BNY Trust Company of Canada. The deal, expected to be completed in the second quarter of 2024, is still subject to customary and regulatory approvals. Notably, the financial terms of the transaction were not revealed.
The divestiture is in alignment with BNY Mellon’s strategic focus to gain a foothold in foreign markets outside Canada, while for Computershare, the deal fits within its core strategy to enhance the footprint and scale of corporate trust business within North America.
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New York Community (NYCB) to Sell Warehouse Loans To JPM
New York Community Bancorp, Inc. (NYCB - Free Report) has entered into a commitment letter with JPMorgan Chase & Co. (JPM - Free Report) to sell around $5 billion in mortgage warehouse loans to the latter.
Sale proceeds will be reinvested into cash and securities, thereby bolstering the company’s liquidity profile. With this, on a pro-forma basis, the ratio of cash and securities to total assets is projected to improve to 24% from 20% at Mar 31, 2024.
Upon closing, NYCB expects the transaction to increase the CET1 capital ratio by 65 basis points. This will result in a pro-forma CET1 capital ratio of 10.8% as of Mar 31, 2024. Also, its pro-forma loan-to-deposit ratio is projected to fall to 104% from 110% at first-quarter 2024 end.
The move is in line with the company’s focus to improve capital, liquidity and loan-to-deposit metrics.
As of first-quarter end, it had total liquidity of $28.6 billion consisting of cash held on balance sheet of $15.5 billion and $13.1 billion borrowing capacity and high-quality liquid assets
NYCB management noted, “The mortgage team at Flagstar built a first-class warehouse business, which is reflected in our ability to execute on an accretive transaction with JP Morgan. The mortgage business remains an important business for the Company and we will continue to provide our mortgage customers and partners the same great service that they have come to expect from Flagstar."
The transaction is subject to completion of due diligence, negotiation of definitive documentation, and satisfaction of customary closing norms. The sale is expected to close in third-quarter 2024.
Markedly, the sale underlines the company’s efforts to shrink its balance sheet by reducing non-core assets. Also, NYCB is aiming to diversify its loan portfolio. The bank’s strategic target is to reduce its commercial real estate portfolio from $47 billion to around $30 billion while building a robust middle market relationship banking franchise. Efforts to improve funding by growing core deposits will improve deposit mix in the upcoming period.
Over the past six months, shares of NYCB have declined 58.3% while JPM shares rallied 34.6%.
Image Source: Zacks Investment Research
Currently, NYCB carries a Zacks Rank #3 (Hold).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Dispositions by Other Companies
Truist Financial (TFC - Free Report) completed the divestiture of the remaining 80% stake in its insurance subsidiary – Truist Insurance Holdings ("TIH") – to Stone Point Capital and Clayton Dubilier & Rice. Mubadala Investment Company and co-investors also participated in the deal.
Following this, TFC executed a balance sheet repositioning strategy. This will help the company generate higher revenues this year than previously expected.
Last month, The Bank of New York Mellon Corp. (BK - Free Report) entered into an agreement with Computershare to divest BNY Trust Company of Canada. The deal, expected to be completed in the second quarter of 2024, is still subject to customary and regulatory approvals. Notably, the financial terms of the transaction were not revealed.
The divestiture is in alignment with BNY Mellon’s strategic focus to gain a foothold in foreign markets outside Canada, while for Computershare, the deal fits within its core strategy to enhance the footprint and scale of corporate trust business within North America.