By Manya Saini
(Reuters) -New York Community Bancorp (NASDAQ:CTBI) shares rose 5% on Thursday after it disclosed it has more than $18.7 billion in reciprocal deposit capacity to offer its customers expanded deposit insurance, calming investor worries around its stability.
Reciprocal deposit networks allow banks to insure deposits over the Federal Deposit Insurance Corporation's $250,000 limit and have aided the growth of insured deposits in recent months.
These networks allow banks to interchange deposits in order to increase exposure to FDIC insurance, according to the Federal Reserve website.
NYCB said if it utilizes the reciprocal deposit capacity, its share of fully insured deposits to total deposits would be 95%.
Deposit security has been in focus since three regional lenders collapsed early last year due to bank runs triggered by worried customers pulling cash.
"It's important that such a high level of deposits are insured and I think the outright risk of a run on the bank on deposits is somewhat muted," D. A. Davidson analyst Peter Winter told Reuters.
NYCB will also hold meetings and events with institutional investors in February and March, it said in a regulatory filing.
Shares in the bank have slumped more than 50% since Jan. 31 when it posted a surprise fourth-quarter loss due to its loans tied to the stressed commercial real estate sector and cut its dividend.
Three credit rating downgrades added to the woes of the lender that has promised to take steps to lower its CRE exposure under newly appointed executive chair Alessandro DiNello. The lender's top executives also bought stakes.
Though analysts said the problems at NYCB are specific to the bank, the gloom over CRE exposure has spilled over to peer lenders.
The KBW Regional Banking Index, a key gauge of investor sentiment toward the sector, has fallen 10% so far this year.
Morningstar DBRS analysts said CRE troubles will weigh on U.S. banks' financial performance, but expect the process will take multiple years with losses spread out as lenders work through maturing loans.
"Some of these loans are well positioned and will be refinanced, some will be extended and some will go bad," the ratings agency wrote in a note, adding it expects most regional banks to work through the problems.