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New York Community Bancorp shares
NYCB.N rose nearly 5% in pre-market trading on Wednesday after the bank agreed to sell a roughly $5 billion portfolio of mortgage loans to JPMorgan Chase JPM.N .
The deal with the largest U.S. bank by assets, announced late Tuesday, will bolster the liquidity of NYCB, which plans to invest the sale proceeds in cash and securities.
In early May, the troubled bank unveiled a recovery plan aimed at returning to profitability over the next two years and pledged to reduce its balance sheet by cutting non-core assets.
“The loan sale is exactly what the new management team discussed on the first quarter earnings conference call, which is an important first step (of many) for management to restore credibility as the team seeks to improve profitability,” Jefferies analysts wrote in a note. .
Warehouse loans, made to lenders that use capital to make mortgage loans, accounted for 6%, or $5.2 billion, of NYCB’s total loans, valued at $82.3 billion per year. March 31.
NYCB has committed to reducing its exposure to commercial real estate (CRE), its core business, which has been hit by rising borrowing costs and falling occupancy, to approximately $30 billion, compared with nearly $47 billion at the end of March.
Analysts and investors expect it will need to attract buyers for its deeply discounted loans and diversify its revenue as it works to clean up its finances.
Brokerage firm Raymond James reiterated its “underperform” rating on the stock after the loan sale.
“Aggressive underwriting of multifamily loans and consumer credit will take a long time to resolve and risks increase if interest rates continue to rise,” the brokerage wrote in a note.
A stock market rout since January has wiped billions from NYCB’s market value, about a year after the collapse of Silicon Valley Bank and Signature Bank sparked widespread concern about the sector’s health.
NYCB stock was last trading at $4.07 pre-hours on Wednesday. That’s down about 62% since the start of the year.
The bank received a $1 billion lifeline in March from a consortium of investors led by former US Treasury Secretary Steven Mnuchin’s Liberty Strategic Capital.
NYCB said it expects the sale to close during the third quarter. He did not disclose the value of the sale.
