US Markets
Wednesday, April 10th, 2024 2:13 pm EDT
Key Points
- NYCB offers the country’s highest interest rate for a savings account: NYCB raised the annual percentage yield through its online arm, My Banking Direct, to 5.55%, surpassing rates offered by other banks. Analyst Ken Tumin suggests this aggressive rate could indicate funding pressure for NYCB.
- NYCB’s financial struggles and subsequent actions: NYCB faced challenges in January due to projected losses on commercial real estate loans, leading to a decline in its stock price, rating downgrades, and management changes. The bank received a capital injection in March, led by Steven Mnuchin’s Liberty Strategic Capital. Despite retaining a significant portion of deposits, NYCB’s shares continue to trade low.
- Competitive landscape and broader trends in savings account rates: Other banks offering rates above 5% tend to be newer or smaller players, while established banks offer an average high-yield savings rate of about 4.4%. The rise in savings account rates over the past two years has intensified competition among banks, especially smaller players, facing challenges in attracting deposits compared to larger institutions.
New York Community Bank (NYCB), which recently required a significant financial rescue, has unveiled the highest interest rate for a savings account in the country, offering 5.55% through its online arm, My Banking Direct. This move, according to analyst Ken Tumin, suggests the bank may be under funding pressure, as it aggressively seeks deposits. NYCB’s troubles emerged in January when it announced larger-than-expected losses on commercial real estate loans, leading to a decline in its stock price, rating agency downgrades, and management changes. The bank received a capital injection led by former Treasury Secretary Steven Mnuchin’s Liberty Strategic Capital in March. Despite the rescue, NYCB saw a 7% decline in deposits, totaling $77.2 billion by March 5. During a conference call, NYCB’s chairman mentioned they didn’t resort to extreme measures in deposit pricing to retain deposits. Joseph Otting took over as CEO on April 1, shortly before the rate increase. Despite efforts, NYCB’s shares continue to trade below $4, down over 68% for the year. Compared to other established banks offering around 4.4% on average, NYCB’s rate stands out. However, Tumin notes that banks offering rates higher than 5% are typically newer or smaller players. The move to raise rates suggests NYCB’s need to compete for deposits, especially after smaller banks faced challenges in attracting deposits compared to larger counterparts. The FDIC insures customer deposits at My Banking Direct up to $250,000. Overall, the rise in savings account rates over the past two years has led to increased competition among banks, with smaller players compelled to offer higher rates to remain competitive, signaling potential funding challenges for some institutions.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/04/10/nycb-is-paying-the-nations-highest-interest-rate-apy.html
