Signature Bank buyer gets a crisis dividend
NEW YORK, March 20 (Reuters Breakingviews) - Financial crises often force regulators and politicians to do things they normally wouldn’t. And one thing U.S. watchdogs definitely don’t do is wave through bank mergers. The failure of lender Signature Bank (SBNY.O) has forced them to abandon their consolidation-skeptic principles, resulting in a sizeable crisis dividend for Signature’s new owner.
New York Community Bancorp (NYCB.N), through its subsidiary Flagstar, has picked up $38 billion of loans and other assets from the crypto-adjacent lender that was forced into receivership last week. The price is $36 billion, most of which Flagstar pays simply by subsuming Signature’s depositors. As well as doing the financial system a solid, it gets around 40 branches, some of which sit alongside existing ones in New York and southern California. The whole deal was done and dusted – and blessed by regulators – within hours of being announced.
Bank mergers almost never happen so quickly, and nobody knows that better than Community Bancorp boss Thomas Cangemi. In December he finally closed the lender’s acquisition of Flagstar, having waited 18 months for approval, even though it was about half the size of the Signature acquisition. Other acquisitive banks, including U.S. Bancorp (USB.N) and Bank of Montreal (BMO.TO), had to wait a similar length of time to close deals of their own. Canada’s TD Bank (TD.TO) is still waiting for permission to buy First Horizon (FHN.N), a bank with $75 billion of deposits it announced a union with last February.
In Signature’s case, time is of the essence. The Federal Deposit Insurance Corp, which handles failed banks, wants the lender out of its hair as soon as possible, at the lowest cost to the taxpayer. That makes scrupulous analysis of the effect on communities less pressing. A study by the St. Louis Federal Reserve found that failed bank selloffs did lessen competition, but not by much. The $1.5 billion increase in Community Bancorp’s value on Monday – a near-40% jump on Friday’s close - is roughly akin to the discount it got for Signature’s assets, but doesn’t suggest an enormous windfall beyond that.
One difference between now and 2008 is that, so far, only banks that have already failed have received the shotgun-marriage treatment. The long-standing regulatory resistance to regular dealmaking explains why bidders have been nowhere to be seen for banks that started to near the precipice last week – including First Republic, whose shares have still not stabilized despite a $30 billion deposit injection from big U.S. banks including JPMorgan (JPM.N). If watchdogs won’t readily approve deals in peacetime, potential acquirers have every incentive to wait until wartime.
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(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)
New York Community Bancorp has acquired $34 billion of deposits from failed lender Signature Bank in a deal brokered by the Federal Deposit Insurance Corp on March 19.
Community Bancorp said it has taken on $13 billion in loans and $25 billion in cash as part of the deal.
The FDIC has been given equity appreciation rights in New York Community Bancorp that could be worth up to $300 million.
The assets have been assumed by Community Bancorp’s subsidiary, Flagstar, which the New York-based bank acquired in a deal that closed in December 2022.
Community Bancorp’s shares rose 39% in early trading on March 20, to $8.91.
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