Key Takeaways
- NYCB shares jumped nearly 6% in premarket trading Wednesday morning after the embattled bank said it has agreed to sell $5 billion of mortgage warehouse loans to JPMorgan Chase.
- The bank anticipates the deal will add 65 basis points to its common equity tier 1 capital ratio and boost its liquidity profile as the proceeds of the transaction will be reinvested into cash and securities.
- NYCB shares may run into selling pressure near the March 2023 swing low around $5.80 but could retest recent lows near $2.70 if the price falls below the 50-day moving average.
Shares in New York Community Bancorp (NYCB) jumped nearly 6% in premarket trading Wednesday after the embattled regional bank said late Tuesday that it had agreed to sell around $5 billion of mortgage warehouse loans to JPMorgan Chase (JPM) in a deal aimed at shoring up its liquidity and capital as it undergoes a turnaround to return to profitability.
NYCB, which expects to complete the sale in the third quarter, anticipates the deal will add 65 basis points to its common equity tier 1 (CET1) capital ratio, resulting in a pro-forma ratio of 10.8% as of March 31 this year, and boost its liquidity profile as the proceeds of the transaction will be reinvested into cash and securities.
The announcement of the sale comes several months after the bank disclosed it had sold $899 million of consumer loans in March and a commercial co-operative loan in late February.
“We are moving forward quickly to implement our strategic plan, which focuses on improving our capital, liquidity and loan-to-deposit metrics,” recently appointed NYCB Chief Executive Officer Joseph Otting said in the statement Tuesday.
Reducing Reliance on Commercial Real Estate Sector
Otting, who took the helm at the bank in April, plans on reducing NYCB’s exposure to New York’s commercial real estate sector, which has faced challenges from higher borrowing costs and lower occupancy, and turn it into a more diversified regional bank.
Cracks started appearing at the beleaguered regional bank in January, when it cut its dividend and ramped up its loan-loss provisions. Those developments, along with material weaknesses in internal controls, management changes, and a string of rating agency downgrades, prompted a group of investors led by former Treasury Secretary Steven Mnuchin to inject more than $1 billion into the lender to shore up its balance sheet.
Monitor These Chart Levels Amid Ongoing Volatility
NYCB shares continued to trend sharply lower for around three months after gapping down more than 37% in late January, with trading volumes remaining above average throughout the decline. More recently, the price has staged somewhat of a recovery, reclaiming the 50-day moving average (MA).
If the stock continues to climb higher, investors should monitor the $5.80 level, an area on the chart where the price may run into selling pressure near the March 2023 swing low. However, if the shares fail to hold above the 50-day MA, watch for a possible retest of recent lows around $2.70.
NYCB shares were up 5.9% at $4.12 at around 7:00 a.m. ET Wednesday.
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