New York Community Bank (NASDAQ:NYCB) had its debt rating dropped to less than a year after it saved Signature Bank. And NYCB stock is cratering this morning.
The bank, which is based on Long Island, said during the fourth quarter. It cut its dividend to 5 cents/share from 17 cents. Shares plunged 22% on Feb. 6 and have fallen by more than half since the start of February.
But shares rose 5.5% overnight after the bank promoted non-executive chairman Alessandro DiNello into an active role .
NYCB stock opened at $4.29 per share, a market cap of $3 billion. It was very briefly in the green before plummeting over 7% to less than $4.
Déjà vu All Over Again?
The is leading to fears of another regional bank crisis, like the one that took out SVB and Signature Bank last year.
The bank is now acting that their money is safe. It claims to have $37.3 billion of total liquidity, .
Regional banks have been on a roller coaster ever since the SVB crisis. The S&P SPDR Regional Banking ETF (NYSEARCA:KRE), which tracks the group, has dropped by over 10% since the end of January.
The 2023 crisis resulted from banks holding long-term debt that couldn’t cover losses. The current problems arise from the banks holding mortgages on office buildings that remain empty after the Covid-19 pandemic.
But there’s more to the NYCB story than just office buildings.
Before buying Signature Bank, NYCB also bought New York’s Flagstar Bank, a large lender . The Signature and Flagstar deals brought NYCB’s assets over $100 billion, bringing in greater regulatory scrutiny.
NYCB Stock: What Happens Next?
If the bank can get its credibility back, the stock is a bargain. But those who invest now are risking all their position if that doesn’t happen.
As of this writing, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
