A New York-based bank is facing a massive exodus of billions of dollars in deposits, raising concerns about its stability in the face of warnings from Federal Reserve Chair Jerome Powell. New York Community Bank (NYCB) has seen its total deposits plummet from $81.365 billion at the start of the year to $77.2 billion on March 6th, a staggering drop of $4.165 billion in less than three months.
The decline in deposits at NYCB is attributed to worries about the bank’s exposure to commercial real estate and its overall financial health following its acquisition of a majority of Signature Bank after its failure last year. Powell’s recent warning about potential bank failures has only added to the concerns surrounding NYCB and other small to medium-sized banks in the US.
Speaking before the House Financial Services Committee, Powell highlighted the vulnerability of smaller banks with high concentrations of commercial real estate loans, particularly in the office and retail sectors. He emphasized the importance of banks having sufficient capital and liquidity to weather potential losses in the commercial real estate market.
Data from real estate intelligence firm Trepp reveals that NYCB’s commercial real estate concentration ratio is at a concerning 477% as of Q3 2023. This ratio indicates the proportion of the bank’s loan portfolio that consists of commercial and multifamily mortgages, as well as construction and land loans. Banks with high levels of commercial real estate concentration may face significant challenges if borrowers are unable to meet their loan obligations.
As NYCB grapples with the flight of billions of dollars in deposits, investors and regulators are closely monitoring the bank’s financial health. Powell’s warning about potential bank failures underscores the ongoing challenges facing the banking industry, particularly for institutions with significant exposure to commercial real estate.
The post on The Daily Hodl highlights the growing concerns surrounding NYCB and the broader banking sector, as regulators and investors brace for potential disruptions in the wake of economic uncertainties.
