Click here for the PDF: The Weekly Beacon – February 2 2024
We will be giving some macro economic market updates on a weekly basis. No equity recommendations will be given in this commentary, and we encourage you to contact us if you have questions regarding any observations.
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This weeks issue:Chinese stocks fade, Chinese risks, Super Bowl prices, Elasticity of sports tickets, Taylor Swift, Apple revenue, Apple’s quiet issue, iPhone sales, Apple versus Magnificent 7, Tesla used and new prices, Slow Tesla demand, Tesla performance in the cold, Nuclear energy, Uranium price, Building nuclear reactors, U.S. regional banks, Signature bank collapse, New York Community Bancorp stock, FED decision, Sticky inflation.
Hero turned to jester
When numerous regional banks across the U.S. were flailing last year, many banks stepped into secure companies that could not fulfill customer deposits due to unrealized losses on debt securities. This led to several banks purchasing Signature Bank’s assets. Signature Bank is the 4th largest bank ever to fail in U.S. history, only behind Washington Mutual which failed in 2008, and First Republic, and Silicon Valley Bank which both failed early last year.
New York Community Bancorp was the company that absorbed the 40 Signature Bank branches last spring in a deal brokered by the FDIC. New York Community Bancorp operates branches across numerous states under several names.
New York Community Bancorp acquired Signature Bank assets for pennies on the dollar at the time which sent NYCB shares surging. NYCB shares were originally hit by the regional banking crisis and lost 35% in value from February 2023 to March 19, 2023. Upon the deal announcement, shares soared from $6.54 on March 17th to $13.87 by the end of July. The bank looked like it was well-positioned and avoided the issues that plagued other regional banks. Fast forward 6 months from that price high and NYCB shares have collapsed to $6.52, erasing all the gains that stemmed from its previous transaction with Signature Bank.
The largest drop for NYCB came on Wednesday of this week, when NYCB shares lost 37%:
The drop came as NYCB reported a surprise net loss of $252 million during their last quarter. The company also announced it would be suspending its dividend. The drop is the largest drop for NYCB in a single day in history.
The company has been and will be building up its reserves to meet regulatory requirements as a larger Category IV bank. Category IV banks have assets between $100 billion and $250 billion. Despite its increase in reserves, NYCB still lags other Category IV banks on capital, reserves, and liquidity. This makes NYCB carry a riskier credit profile than its peers. After acquiring the ailing Signature Bank and its $38 billion in assets last year, NYCB now meets the regulatory definition of a Category IV bank. It also closed its acquisition of Flagstar Bank in late 2022. As of December 31, total assets were $116.3 billion, up from $111.2 billion on September 30th.
