New York Community Bank scores a capital infusion, cooling fears of a Silicon Valley Bank sequel
Something to Mnuch on… New York Community Bank got a $1B booster shot from a group of investing firms led by former US Treasury Secretary Steven Mnuchin’s Liberty Strategic Capital. Regional lender NYCB’s stock has plunged ~70% since it disclosed that it had lost $185M on a pair of real-estate loans. NYCB is tightly tied up in commercial real estate, which isn’t doing so hot right now. And 44% of its loans are in multifamily housing, 8% of which are at a high risk of default.
Growth spurt: NYCB is one of the US’s largest regional banks, ending last year with $116B in assets. It broke the $100B mark after acquiring failed Signature Bank, a move that brought it more regulatory scrutiny.
Contagion: Shares of other regional banks have slipped in NYCB’s wake, igniting fears of a wider banking fallout — like the one that happened nearly a year ago.
Do you get déjà vu?... Silicon Valley Bank got bailed out by the FDIC last March after it announced $2B in losses, inciting a bank run (TLDR: it invested most of its deposits into Treasury bonds, which plunged in value after rates soared). It was the biggest bank to collapse since Washington Mutual in 2008, and, shortly after SVB’s crisis, Signature Bank and First Republic Bank also failed. High interest rates and overexposure to real-estate loans are still causing problems for smaller banks. But experts say some things’ve changed: rates have stabilized and the gov’t and big banks appear to be better prepared.
Investors have fear of the known… The 2008 financial crisis still looms large in the public psyche, and one bank’s struggles can reignite fears of a meltdown. But experts including Fed Chair Powell said an NYCB-incited crisis is unlikely. The Fed’s working with regional banks that may be affected, while large lenders including JPMorgan Chase and Citigroup have padded their balance sheets against real-estate losses.