NYCB Stock Alert: Why Is New York Community Bank Up 30% Today?

  • New York Community Bancorp (NYCB) stock is up 30% today and trending on social media.
  • NYCB agreed to acquire most of the deposits and some of the loans of Signature Bank, which failed last week.
  • NYCB will probably make a large profit on the loans that it acquired.
NYCB stock - NYCB Stock Alert: Why Is New York Community Bank Up 30% Today?

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New York Community Bancorp (NYSE:NYCB) stock is up 30% today and trending on social media. The regional bank’s subsidiary is going to buy assets from New York-based Signature Bank, which was closed by New York regulators amid mass withdrawals by its depositors.

More About New York Community Bancorp’s Purchases

New York Community’s subsidiary, Flagstar Bank, is acquiring Signature’s 40 branches and most of its remaining deposits from the Federal Deposit Insurance Corporation. However, the subsidiary will not acquire the bank’s crypto deposits.

Regarding loans, Flagstar obtained $12.9 billion of Signature’s deals for just $2.7 billion. The latter component of the deal is probably what is causing NYCB stock to rally sharply today.

That’s because, unless the U.S. economy goes into a complete tailspin, the bank will, in all likelihood, make a huge profit on the loans that it obtained from the FDIC. Indeed, since the FDIC is still holding $60 billion of Signature’s loans, NYCB probably chose to acquire Signature’s safest lending deals.

More Background on Signature

Signature became the victim of a classic bank run after its larger, California-based peer, Silicon Valley Bank, failed. That’s because, like Silicon Valley, a high percentage of the value of Signature’s deposits was not insured by the FDIC. Additionally, the two banks both had significant crypto businesses and had lent a meaningful amount to tech firms.

Portions of the tech sector have been badly hit by interest rate hikes, while the Federal Reserve, the FDIC, and the Comptroller of the Currency had previously urged banks to avoid “issuing or holding as principal crypto-assets.”

Speaking of cryptos, it will be interesting to see whether the FDIC will fully ensure Signature’s crypto deposits, since they, of course, are not dollar-denominated.

On the date of publication, Larry Ramer 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 Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been PLUG, XOM and solar stocks. You can reach him on Stocktwits at @larryramer.

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