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New York Community Bank loses billions in deposits over concerns about real estate exposure
Learn why a New York-based bank is losing billions of dollars in deposits as Fed Chair Jerome Powell warns of more bank failures. Concerns over NYCB's credit exposure to commercial real estate and its balance sheet have led to a decline in deposits. Learn more about the current challenges facing the U.S. banking sector and NYCB's risks related to the commercial real estate market.
New York Community Bank loses billions in deposits over concerns about real estate exposure
A New York bank sees billions in deposit outflow as Fed Chair Jerome Powell issues an industry-wide warning. New York Community Bank's (NYCB) latest financial statement shows that total deposits fell from $81.365 billion at the start of the year to $77.2 billion as of March 6 - a decline of $4.165 billion in less than three months.
The decline in deposits at NYCB comes amid concerns about the bank's exposure to commercial real estate and its overall balance sheet due to a series of acquisitions, including a majority stake in failed Signature Bank.
The bank's deposit data comes as Powell warns before the House Financial Services Committee that more bank failures are on the way. Powell emphasizes that smaller and mid-sized U.S. banks are particularly vulnerable due to their exposure to the weakening commercial real estate market.
According to data from real estate information firm Trepp, the NYCB's commercial real estate concentration ratio is around 477% in the third quarter of 2023. A high commercial real estate concentration ratio suggests that a significant portion of the loan portfolio consists of commercial mortgages, multifamily housing, and construction and land loans. Banks with high concentrations of commercial real estate could suffer significant losses if borrowers are unable to make scheduled loan payments.
Tabel:
| bank | NYCB |
|---|---|
| deposits | $77.2 billion |
| Overall decline | $4.165 billion |
Source: NYCB Financial Report Q4 2023
NYCB and other smaller and mid-sized banks are expected to struggle with the consequences of exposure to the commercial real estate market in the coming years. However, Powell emphasized that this does not pose an immediate threat to the big banks.
It is worth noting that the NYCB has already been impacted by a number of acquisitions, including acquiring a majority stake in the failed Signature Bank. This has raised concerns about the bank's overall balance sheet, particularly due to its exposure to commercial real estate.
Overall, the situation remains challenging for NYCB and other smaller and mid-sized banks as they may experience losses if borrowers are unable to make their payments. However, regulators are working closely with these banks to ensure they have sufficient capital and liquidity to address these challenges. Nevertheless, the impact of exposure to the commercial real estate market is expected to continue for some time.