JPMorgan Gives a Lift to Another Troubled Regional Bank

(Yahoo! Finance) - 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.

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.

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.

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.

By David Hollerith - Senior Reporter


More Articles