shares of struggle New York Community Bank. Shares fell more than 40% on Wednesday amid reports that the region’s banks were seeking cash infusions.
Reuters and the Wall Street Journal reported on Wednesday that the bank was seeking cash from outside investors to shore up its balance sheet. NYCB did not immediately respond to CNBC’s request for comment.
Trading in the stock was suspended pending the news when the share price fell 42%.
NYCB shares fell sharply Wednesday.
The bank’s share price had fallen sharply a day before the report was released. The stock is now below $2 a share after starting the year above $10 a share.
The cash infusion would be NYCB’s latest development in a tumultuous start to the year. The bank disclosed in late January that it was significantly raising provisions for potential loan losses on its balance sheet and that its commercial real estate exposure was a potential issue. Shortly thereafter, Moody’s Investors Service downgraded the bank’s credit rating to junk status, and NYCB appointed former Flagstar Bank CEO Alessandro DiNello as executive chairman.
Last week, NYCB disclosed that it had “identified material deficiencies in the company’s internal controls related to internal loan reviews” and announced Dinello as taking over as CEO.
The issues surrounding NYCB are reminiscent of those faced by three banks – Silicon Valley Bank, Signature Bank and First Republic – before they collapsed in the spring of 2023. They are among several regional banks in trouble as rising interest rates drive down the value of older Treasury holdings and cause some savers to move their accounts elsewhere.
Traders have been scaling back expectations for rate cuts this year as the U.S. economy continues to show surprising strength and inflation remains above the Federal Reserve’s 2% target. A longer-term higher interest rate environment could put pressure on the banks themselves and on commercial real estate, a key business for NYCB and many other regional lenders.
NYCB’s woes may have caught regulators and investors off guard. Last March, the regional bank acquired a majority stake in Signature Bank from the Federal Deposit Insurance Corporation.
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