On Wednesday local time, the stock price of New York Community Bancorp staged a dramatic reversal during trading, turning from a sharp drop of 42% to an increase, closing up 7.45%, and closing at $3.46 per share.
As the market reported earlier, New York Community Bank was exploring financing, and its stock price temporarily suspended trading due to fluctuations, falling as much as 42% and below $2. In the afternoon, the New York Community Bank announced a fundraising of $1 billion and made leadership adjustments. Former US Treasury Secretary Steven Mnuchin's private equity firm Liberty Strategic Capital led the deal, which also includes Hudson Bay Capital and Reference Capital Partners. As part of the transaction, Mnuchin will become one of the four new members of the bank's board of directors, with former Director of the Office of the Comptroller of the Currency, Joseph Otting, serving as CEO.
The stock price of New York Community Bank has been volatile recently. Last Friday, after the bank disclosed internal control issues and announced leadership changes, the stock price plummeted by over 25% to a 52 week low. The bank announced last Thursday the appointment of its executive chairman, Alessandro DiNello, as President and CEO.
Jay Woods, a trader at the New York Stock Exchange and Chief Global Strategist at Free Capital Markets, told First Financial reporters that since the rating was downgraded last week, the market is concerned that possible deposit outflows are causing bank runs. If deposit outflows continue to increase, banks will have no way to maintain their solvency.
The issue surrounding New York Community Bank is reminiscent of the crises experienced by Silicon Valley Bank, Signature Bank, and First Republic Bank. However, Woods believes that unlike a year ago, the stock price volatility of New York Community Bank has not dragged down the regional banking sector and is an isolated event. "Last year's banking crisis was an overall panic, but this time it seems to have been limited to New York Community Bank," Woods said. "However, with the continuous updates of the news, investors do not want to repeat the same mistake and are eager to withdraw from the bank, which is similar to the situation at that time."
As the stock prices of community banks in New York plummeted, Federal Reserve Chairman Jerome Powell stated during a hearing of the House Financial Services Committee that the Federal Reserve is particularly concerned about banks with high exposure to commercial real estate. He stated that the Federal Reserve has contacted these banks to ensure they have plans to address this situation. Meanwhile, some banks will suffer losses.
Although New York Community Bank is facing a crisis due to its high exposure to commercial real estate, it has not had a ripple effect on other banks with similar investment portfolios. The stock price of Silicon Valley National Bancorp, which has the largest exposure to commercial real estate, closed up 3.68% on Wednesday. The SPDR S&P regional bank ETF (KRE) closed slightly lower by 0.12% on Wednesday, while the Invesco KBW regional bank ETF also saw little decline.
Woods told First Financial that the crisis at New York Community Bank has little to do with Federal Reserve policy, as the bank did indeed take over non-performing assets when acquiring the signing bank. When the regional banking crisis occurred last year, the Federal Reserve was still raising interest rates, but has not raised them recently, so it will not have a dramatic impact on banks. He said, "More people are concerned about the banks themselves and the real estate loan challenges they are facing."