Yahoo Finance NYCB to Sell $5 Billion of Loans to JPMorgan to Free Up Cash
(Bloomberg) — New York Community Bancorp, disposing of assets and freeing up cash after its rescue by investors, agreed to sell about $5 billion of loans to JPMorgan Chase & Co.
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The disposal of so-called mortgage warehouse loans will bolster NYCB’s capital and improve its liquidity, with proceeds to be held in cash and securities, the company said Tuesday in a statement that didn’t disclose the terms. NYCB had told investors about two weeks ago that it was poised to do a deal of that size at par, minus a transaction fee.
The stock climbed 3.4% to $4.02 in extended trading at 7:25 p.m. in New York. It was down 62% this year through the close of regular trading.
New Chief Executive Officer Joseph Otting is overhauling the balance sheet after concerns about the lender’s heavy exposure to New York commercial real estate sent the stock into a tailspin. The bank offered billions of dollars in warehouse lines of credit to other mortgage lenders, which could pay down the debts by selling the loans to other investors or NYCB itself, filings show.
“We are moving forward quickly to implement our strategic plan, which focuses on improving our capital, liquidity and loan-to-deposit metrics,” Otting said in the statement. “The mortgage business remains an important business for the company, and we will continue to provide our mortgage customers and partners the same great service that they have come to expect.”
NYCB said it expects to complete the sale in the third quarter, once the parties finish due diligence and hash out final documentation.
The transaction would boost the firm’s common equity Tier 1 capital ratio by 65 basis points, resulting in a pro-forma ratio of 10.8% as of March 31 this year, the company said.
NYCB has been under pressure since announcing in January that it was cutting its dividend and stockpiling provisions in case loans sour. As the share price extended its tumble through additional developments, including the disclosure of material weaknesses in how the bank tracks loan risks, a group of investors led by former Treasury Secretary Steven Mnuchin intervened, injecting more than $1 billion of capital into the lender and installing Otting at the top.
The new executive team has pledged to reshape the lender — known for catering to landlords of rent-regulated multifamily buildings in New York — into a more diversified regional bank. The company sold a portfolio or RV and marine loans during the first quarter.
The deal announced Tuesday “is another incremental step in shoring up the balance sheet and represents one of management’s commitments over the short term to eventually return to profitability,” Bloomberg Intelligence analyst Herman Chan wrote in a note.
—With assistance from Bre Bradham.
(Updates with expected timing, projected impact on capital and analyst comment from the sixth paragraph.)
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