New York Community Bancorp may be able to raise capital to bolster its balance sheet and cover potential loan losses by selling mortgage servicing rights, analysts at KBW said Tuesday.
New York Bancorp NYCB Community Stock,
It rose 10% on Tuesday, after falling 23% in the previous session.
With stock prices declining in recent weeks and a portfolio of office properties and multifamily loans under pressure, New York Community Bancorp NYCB announced,
It will likely need to raise more capital to meet regulatory balance sheet requirements for banks with assets of $100 billion or more.
The bank could leverage its $78 billion in unpaid balances from mortgage servicing rights to raise capital through a potential sale, KBW analysts Christopher McGroty, Boz George and Alexander Bond said in a research note late Monday. Analysts said the portfolio was worth $1.1 billion.
New York Community Bancorp stock rose nearly 4% in premarket trading Tuesday, after falling 23% in the previous session.
KBW analysts estimate that the sale of mortgage servicing rights could boost the bank's Tier 1 common equity (CET1) ratio by 10 to 15 basis points. The CET1 ratio is one of the key metrics used by regulators to assess a bank's liquidity and strength to face potential challenges.
KBW lists potential buyers for New York Community Bancorp's Fannie Mae and Freddie Mac mortgage servicing rights, including Mr Cooper Group COOP,
Rhythm Capital Corp Rhythm,
Annaly Capital Management Inc NLY,
Two Harbors Investment Company. two,
Funds specializing in mortgage servicing rights.
JPMorgan Chase & Co. JPM,
It has also held mortgage servicing rights in the past.
KBW said the most likely buyers would be financial firms such as Annaly Capital Management and Two Harbors rather than operating companies.
That's because these deals will allow New York Community Bancorp to keep its security deposits if it continues as a mortgage subservicer.
“As long as the company maintains secondary servicing on any mortgage servicing rights sold, it should be able to maintain deposits, especially since most buyers are unbanked,” KBW said. “However, if they sell the entire service operation, it will likely be difficult to maintain security deposits.”
New York Community Bancorp operates one of the largest mortgage subservicing companies in the United States, with a portfolio of more than 1 million loans with unpaid balances of about $300 billion, KBW said.
New York Community Bancorp, the parent of the Flagstar operating unit, said in late January that it needed to cut its dividend to raise more capital as a Series 4 bank with assets of between $100 billion and $250 billion, following its acquisition of Signature Bank last year. . .
Since then, the bank has faced more bad news including revelations last week that it faced “material weaknesses” in its accounting protocols and news that it would delay its financial disclosures.
New York Community Bancorp stock is down 73% so far this year, including a 23% drop on Monday.
Read also: Standard & Poor's says nine of the largest US banks can address their 'problematic' exposure to office properties.
Philip Van Dorn contributed for this article
