By Manya Saini and Niket Nishant
(Reuters) – New York Community Bancorp (NASDAQ:) shares rose nearly 17% on Friday after executives said they had bought shares of the U.S. lender.
NYCB has taken steps to boost investor confidence in recent days after its shares have lost about 50% since Jan. 31, when it announced a surprise quarterly loss and cut its dividend.
The total purchases made by NYCB executives were more than $850,000, according to regulatory filings released Friday. The documents contained no details other than the name of the buyer, the number of shares and their value.
Among the buyers was newly appointed NYCB executive chairman Alessandro Dinello, who bought 50,000 shares for about $209,480, filings show. Director Peter Shoals purchased 100,000 shares for $414,750.
Market participants tend to monitor executives’ trading activity because investors believe insiders may have a clearer view of the company’s prospects.
“If insiders buy a significant amount of shares, it sends a signal to the outside world that insiders aren’t worried,” said Eric Compton, director of technology equity research at Morningstar. “In banking, confidence can be the difference between success and failure.”
The bank’s shares closed at $4.90, up 16.9%.
Dinello, who was named executive chairman earlier this week, said Wednesday that NYCB will take steps to reduce its exposure to the troubled commercial real estate (CRE) sector, including considering the sale of loans in its CRE portfolio.
Michael Ashley Shulman, partner and chief investment officer at Running Point Capital Advisors, said the purchases could indicate management believes NYCB’s current share price may not reflect the bank’s actual health.
“On the other hand, it could be said that their … purchase of shares could be seen as a relatively low-cost option that would help save their $3.2 billion market capitalization bank, its employees, depositors and their current ownership stake,” said He.
The bank did not immediately respond to a request for comment on the purchases.
The stock purchase comes a day after Morningstar downgraded NYCB’s credit rating due to CRE’s “excessive” risks. Ratings agencies Fitch and Moody’s (NYSE:) have already downgraded their ratings on NYCB.
The sell-off in NYCB shares raised fears of a chain reaction as investors feared potential defaults on CRE loans would damage the balance sheets of several regional banks.
The KBW Regional Banking Index, a key index for gauging investor sentiment toward the sector, has fallen more than 10% this year. It rose 1.85% on Friday. At the close, shares rose 0.6% to a record high.