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JPMorgan gives a lift to another troubled regional bank

In Business
May 15, 2024

JPMorgan Chase (JPM) is once again providing a lift to another troubled regional lender a year after it helped calm a mini-banking crisis.

The stock of New York Community Bancorp (NYCB) rose as much as 5% in premarket trading Wednesday after announcing Tuesday night that JPMorgan Chase has agreed to purchase $5 billion of its mortgages.

The stock changed course Wednesday after the market opened, falling 2%.

NYCB has been seeking to unload certain assets as it tries to bolster its capital and liquidity.

CEO of Chase Jamie Dimon looks on as he attends the seventh

JPMorgan Chase CEO Jamie Dimon on May 13, outside Paris. LUDOVIC MARIN/Pool via REUTERS (via REUTERS / Reuters)

This is far from the first time the nation’s largest bank has tried to act as stabilizing force for a distressed lender.

Last year, JPMorgan led an attempted rescue of San Francisco regional bank First Republic as a group of banks contributed $30 billion in deposits.

Weeks later JPMorgan purchased most of First Republic’s assets from the FDIC after the lender failed on May 1.

A security guard stands outside a First Republic Bank branch in San Francisco, California, U.S. April 28, 2023. REUTERS/Loren Elliott

A First Republic Bank branch in San Francisco. REUTERS/Loren Elliott (REUTERS / Reuters)

NYCB, one of the country’s top 30 banks, began wobbling on Jan. 31 when it surprised analysts by slashing its dividend and setting aside more for loan losses.

The turmoil intensified after it disclosed weaknesses in its internal controls, and a tenfold increase in its fourth quarter loss to $2.7 billion.

Its struggles fed concerns that mounting commercial real estate weaknesses could ripple through other banks.

The lender caught a break in early March when a team of investors led by former Treasury Secretary Steven Mnuchin gave the bank a $1 billion capital infusion and overhauled its management with veteran bankers.

FILE PHOTO: A sign is pictured above a branch of the New York Community Bank in Yonkers, New York, U.S., January 31, 2024. REUTERS/Mike Segar/File Photo

A New York Community Bank in Yonkers, NY. REUTERS/Mike Segar/File Photo (Reuters / Reuters)

Its new CEO earlier this month outlined a “clear path to profitability over the following two years.”

That CEO, Joseph Otting, said Tuesday night when announcing the JPMorgan sale that “we are moving forward quickly to implement our strategic plan.”

Chris Marinac, an analyst covering NYCB for Janney called the loan sale “incremental progress” in its credit situation.

“NYCB likely has several more quarters of this process, so much more work ahead,” Marinac said over email, referring to the bank’s credit situation.

David Hollerith is a senior reporter for Yahoo Finance covering banking, crypto, and other areas in finance.

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