Garnet Capital Advisors Blog

February 9, 2015

New York Community Bancorp strengthens balance sheet through asset sales

New York Community Bancorp, Inc. has been generating many benefits by selling assets, keeping its balance sheet below the $50 billion mark and improving its financial results in the process. 

SIFI criteria
Reaching this threshold would make the organization a systemically important financial institution in the eyes of regulators, which would come with additional compliance and higher expenses. Since the $50 billion figure would include many regional banks, some industry observers have called for a higher bar.

Joe Ficalora, chief executive of New York Community Bancorp, addressed this matter during a conference call late last month, indicating that based on his recent conversations, he thinks lawmakers could soon create a higher cutoff for SIFIs, American Banker reported.

"We are closer to actually having that happen than we've been at any other time," he said, according to American Banker. "There are both democrats and republicans advocating that we move the bar. So it could happen relatively quickly."

Proactive asset sales
Regardless of whether the government changes the criteria, the financial institution has been taking a proactive approach to the situation, American Banker reported. To stay below the $50 billion threshold, the company has been carefully managing its balance sheet, cutting the value of its securities book by $355 million during the quarter and selling $601 million in loans.

These transactions helped fuel strong financial results, and the bank announced Jan. 29 it generated net income of $131.2 million in the fourth quarter. When adjusted on a per-share basis, this figure came to 30 cents.

These results beat the average estimate of 27 cents per share provided by analysts surveyed by Zacks Investment Research, according to The Associated Press. Revenue, which totaled $354.2 million during the period, also surpassed the predictions of these same analysts, who forecast the financial institution's top line would be $329.2 million.

Opportunities for banks
While the jury is out on whether lawmakers will increase the threshold for SIFIs to more than $50 billion in assets, financial institutions can avoid the more stringent compliance and higher costs associated with this designation by using asset sales.

To achieve the best possible odds of ensuring these transactions take place in a compliant manner and generate attractive prices, banks can work with Garnet Capital Advisors, a loan sale advisory with experience in many different debt types.