A New York Community Bank stands in Brooklyn on February 8, 2024 in New York City.
Spencer Platt | Getty Images
New York Community BankThe regional lender, which needed a lifeline worth more than $1 billion last month, offers the country’s highest interest rate on a savings account.
NYCB has increased the annual percentage yield offered through its online arm My Banking Direct to 5.55%, higher than those generally available, according to Ken Tumin, an analyst who tracks interest rates for its website DepositAccounts Accounts of any other bank.
The outstanding interest rate could be a sign that NYCB is under funding pressure, Tumin said.
“It looks like they are trying really hard to attract deposits,” Tumin said. “My Banking Direct has been around for a long time, more than 10 years, so an aggressive interest rate could be a sign that you need financing.”
NYCB’s troubles began in January when the company said it was preparing for far larger losses on commercial real estate loans than analysts had expected. This triggered a downward spiral in the stock price, downgrades by rating agencies and several management changes. The bank announced a capital infusion on March 6 from investors led by former Treasury Secretary Steven Mnuchin’s Liberty Strategic Capital.
In the month before the rescue was announced, NYCB shed 7% of its deposits, falling to $77.2 billion as of March 5, the bank said in a presentation.
Nothing “crazy”
During a conference call following the capital raise, analysts asked how NYCB managed to retain so many of its deposits during the turbulent period.
“We haven’t done anything crazy in terms of deposit pricing,” NYCB Chairman Sandro DiNello responded. “We didn’t go out and offer 6% CDs or anything like that to make the numbers look good, if that’s what you care about.”
NYCB did not respond to a call for comment on its funding strategy.
Joseph Otting, a former comptroller of the currency, took over as the bank’s CEO on April 1, about a week before the rate hike.
Despite the turnaround plan, shares of NYCB are still trading for less than $4 apiece and are down more than 68% year-to-date.
Forced to pay
According to Tumin, other banks currently offering interest rates higher than 5% tend to be newer or smaller providers than NYCB.
At established banks, the average high-yield savings rate is around 4.4%, and several of them (including American Express, Goldman Sachs And allies) cut interest rates last month, he said. The NYCB rate also outperforms accounts listed on NerdWallet and Bankrate.
Customer deposits with My Banking Direct are insured by the FDIC up to the standard value of $250,000.
In the last two years, savings account interest rates have generally increased.
Since the regional banking crisis hit Silicon Valley Bank and First Republic last year, smaller players have been forced to pay higher interest rates on deposits than giants like them JPMorgan Chase to compete, said Matt Stucky, chief equity portfolio manager at Northwestern Mutual.
“When a bank has to offer a much higher interest rate, it’s usually because they have a deposit problem,” Stucky said. “It is no longer difficult for customers to change banks.”
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2024-04-10 11:12:40
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