NYCB lost 7% of deposits in past month, slashes dividend to 1 cent

New York Neighborhood Financial institution mentioned Thursday it misplaced 7% of its deposits within the turbulent month earlier than saying a $1 billion-plus capital injection from buyers led by former Treasury Secretary Steven Mnuchin’s Liberty Strategic Capital.

The financial institution had $77.2 billion in deposits as of March 5, NYCB mentioned in an investor presentation tied to the capital elevate. That was down from $83 billion it had as of Feb. 5, the day earlier than Moody’s Buyers Service minimize the financial institution’s credit score scores to junk.

NYCB additionally mentioned it is slashing its quarterly dividend for the second time this yr, to 1 cent per share from 5 cents, an 80% drop. The financial institution paid a 17-cent dividend till reporting a shock fourth-quarter loss that kicked off a detrimental information cycle for the Lengthy Island-based lender.

Earlier than saying an important lifeline Wednesday from a gaggle of personal fairness buyers led by Mnuchin’s Liberty Strategic Capital, NYCB’s inventory was in a tailspin over issues in regards to the financial institution’s mortgage e-book and deposit base. In a bit of greater than a month, the financial institution modified its CEO twice, noticed two rounds of score company downgrades and introduced deepening losses.

At its nadir, NYCB’s inventory sank beneath $2 per share Wednesday, down greater than 40%, earlier than in the end rebounding and ending the day increased. Shares climbed 10% in Thursday morning buying and selling.

The capital injection introduced Wednesday has raised hopes that the financial institution now has sufficient time to resolve lingering questions on its publicity to New York-area multifamily condominium loans, in addition to the “materials weaknesses” round mortgage overview that the financial institution disclosed final week.

Mnuchin informed CNBC in an interview Thursday that he began NYCB “a very long time in the past.”

“The problem was actually round perceived dangers within the loans, and with placing billion {dollars} of capital into the steadiness sheet, it actually strengthens the franchise and no matter points there are within the loans we’ll have the ability to work by way of,” Mnuchin informed “Squawk on the Road.”

“I believe there’s a fantastic alternative to show this into a really engaging regional business financial institution,” he added.

Mnuchin mentioned he did “in depth diligence” on NYCB’s mortgage portfolio and that the “greatest downside” he discovered was its New York workplace loans, although he anticipated the financial institution to construct reserves over time.

“I do not see the New York workplace figuring out or getting higher sooner or later,” Mnuchin mentioned.

Incoming CEO Joseph Otting, a former Comptroller of the Forex, informed analysts Thursday that the financial institution would look to strengthen its capital and liquidity ranges and scale back its focus in business actual property loans.

NYCB will probably need to promote property in addition to construct reserves and take write-downs, based on Piper Sander analysts led by Mark Fitzgibbon.

Whereas information of the funding is sweet for regional banks general, Wells Fargo analyst Mike Mayo cautioned that the cycle for business actual property losses was simply starting as loans come due this yr and subsequent, which can most likely trigger extra issues for lenders.

— CNBC’s Laya Neelakandan and Ritika Shah contributed to this report.

Correction: New York Neighborhood Financial institution introduced an funding from a gaggle of personal fairness buyers on Wednesday. An earlier model of this story misstated the day.