New York Community Bancorp (NYSE: NYCB) stock soared almost 17% on Friday following the revelation of significant stake acquisitions by senior executives.
The CEO of New York Community Bancorp (NYCB) and other insiders acquired over 200,000 shares of the company’s stock. It follows a significant drop in the stock’s value, nearly 50%, after an unexpected announcement last week of a dividend reduction and increased loan-loss provisions.
Official records indicate that some insiders at the New York-based bank executed share purchases on Friday. Alessandro DiNello, who was recently appointed as the executive chairman, bought 50,000 shares. CEO Thomas Cangemi acquired around 11,000 shares, and several other insiders, including board members, also made purchases. The total value of these combined purchases is around $870,000, as calculated by Bloomberg.
Eric Compton, the Director of Technology Equity Research at Morningstar, expressed that when insiders buy a significant amount of shares, it sends a message to the public that the insiders are not concerned.
“In banking, confidence can be the difference between making it and not making it.”
NYCB: Declining Market Value
New York Community Bancorp (NYSE: NYCB) has seen a decline in its market value by around $4 billion following its announcement on January 31. The announcement entailed a reduction in dividends and the creation of a loan-loss provision that was larger than analysts had anticipated. The Hicksville, New York-based bank is now under the threat of increased regulation due to the growth in its asset size after it acquired a portion of Signature Bank last year. It is also dealing with concerns related to its commercial property loans. This unexpected announcement caused a disturbance in the regional bank shares, but the sector has since regained stability.
Just moments after the disclosure of an insider purchase on Friday, a trader or a group of traders quickly bought call options equivalent to over 550,000 shares with strike prices of $4.50. One of these contracts expired at the end of the Friday session, while another will expire in a week. These contracts became in-the-money shortly after 11 a.m. New York Time.
According to a note by Keefe, Bruyette & Woods analysts on Friday, banks have typically shown better performance in the week and month following stock purchases by top executives. This observation was based on a review of more than 50 open-market purchases for lenders in the Russell 1000 Index.
NY Community Bancorp (NYSE: NYCB) Stock Price Action
NYCB stock rallied 16.95% on Friday, its biggest gain since March last year, closing at $4.90. The traders had exchanged hands with 83,786,272 (83.78 million) shares compared to the average daily trading volume of 19.96 million.