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Banks are dialing back the yields they pay on certificates of deposit, but a notable name is still commanding one of the highest rates available.
New York Community Bank offers the highest CD rate for maturities under 36 months among the banks in Morgan Stanley's coverage, coming in at 5.5%. Webster Financial followed in second place, with a rate of 5.4%, and Bank OZK rounded out the top three with a rate of 5.3%.
New York Community Bank is offering a sweetened annual percentage yield at a time when the institution itself is going through a period of tumult. Even as the company is willing to pay an annual percentage yield of 5.5% on a seven-month CD, its shares are down more than 50% this year. In February alone, the stock is off by 24%.
YTD performance of NYCB shares
In late January, the Hicksville, New York-based bank took a higher-than-anticipated charge against expected loan losses. The bank also slashed its quarterly dividend by about 71% to 5 cents a share. Earlier this month, Moody's Investors Service downgraded the bank's long-term ratings to junk, citing "multi-faceted financial, risk-management and governance challenges facing NYCB."
Nevertheless, savers should be aware that their deposits, be they in bank accounts or in CDs, are subject to protection by the Federal Deposit Insurance Corporation. Generally, the FDIC covers $250,000 per depositor, per FDIC-insured bank, for each account ownership category.
Top CD rates at banks under Morgan Stanley's coverage
| Ticker | Name | 1-12 month CD rate | 13-36 month CD rate | Highest Rate < 36 months |
|---|---|---|---|---|
| NYCB | New York Community Bank | 5.50% | 5.15% | 5.50% |
| WBS | Webster Financial Corporation | 5.40% | 3.60% | 5.40% |
| OZK | Bank OZK | 5.30% | 5.00% | 5.30% |
| BKU | BankUnited | 5.25% | 0.10% | 5.25% |
| CMA | Comerica | 5.25% | 0.15% | 5.25% |
Source: Morgan Stanley
Expect CD rates across the board to continue falling, with longer-dated offers likely to decline faster than short-dated instruments, wrote Morgan Stanley analyst Betsy Graseck in a Thursday report.
"Once the Fed eventually begins to cut, the path for net interest income will depend heavily on how quickly banks can bring down their overall deposit costs," she said.
