Ron Hermance the CEO of HCBK said: " recent market events and the unprecedented involvement of the United States government in both the mortgage markets, through the government-sponsored enterprises (the “GSEs”), and the maintenance of low market interest rates, have resulted in an environment that has caused our balance sheet to be less responsive to current market conditions... Accordingly, we undertook this balance sheet restructuring at a time when market interest rates are beginning to increase with the intent on preserving our shareholders’ equity as much as reasonably possible and yet executing a trade that looks to increase our forward earnings potential."
The company repurchased $12.5 billion of debt and sold $8.5 billion of mortgage backed securities in the transaction and the company sold $5 billion of new debt issued at 0.66%. The company will realize a $644 million loss from the transaction. The company made $537 million of profit last year, hence the company wiped out over a year of profit.
Now, Buffalo based M&T Bank is the only bank to not decrease their dividend and remain profitable in every quarter since the financial crisis. Will a dividend cut for HCBK follow?
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