New York Community Bank stands in Brooklyn, New York, on February 8, 2024.
Spencer Pratt | Getty Images
new york community bank on Wednesday posted a $335 million loss for the quarter due to deterioration in commercial loans and higher expenses, but the company’s stock soared on new earnings targets.
The first-quarter loss was equivalent to 45 cents per share, compared with net income of $2 billion, or $2.87 per share, in the year-ago period. Adjusted for costs, including merger-related items, the loss was $182 million, or 25 cents per share, larger than LSEG’s expected loss of 15 cents per share.
“Since assuming the role of CEO, my focus has been on transforming New York Community Bank into a high-performing, diversified regional bank,” CEO Joseph Otting said in a release. ” he said. “This year will be a transition year for us, but we have a clear path to profitability over the next two years.”
Otting said the bank’s profitability and capital levels will improve by the end of 2026. This includes a 1% return on average earning assets and a target level of common equity Tier 1 capital of 11% to 12%.
The bank’s shares rose 33% in early trading.
Otting took over the troubled regional bank in early April after a group of investors led by former Treasury Secretary Steven Mnuchin injected more than $1 billion into the bank. NYCB’s woes began in late January with a dismal fourth-quarter earnings report that shocked analysts with its high level of loan loss reserves. The bank’s stock price plummeted due to repeated management changes and ratings downgrades by rating agencies.
Otting told analysts on a conference call that NYCB had “identified an opportunity” to sell $5 billion of assets to increase liquidity levels. The transaction could close within 60 to 70 days and could be announced soon, he added.
The bank booked a reserve of $315 million for credit losses in the quarter, compared with $170 million a year earlier. It also said it expects the percentage of reserves to increase for the remainder of 2024.
Non-performing loans rose $370 million from the fourth quarter of 2023 to $798 million in the quarter, as high interest rates hit commercial real estate borrowers hard.
NYCB is assuming a 42% drop in the value of its office properties and a roughly 30% decline in the value of its multifamily properties as it prepares for expected future loan losses, executives said on a conference call with analysts. .
“The office market is pretty stressed,” Otting said. “Some office loans were under stress, so an investor chose to come to us and we had to take over the property.”
Otting said the bank is looking to reduce its exposure to office and multifamily loans over time by managing customer relationships and eliminating customers who don’t have deposits with NYCB.
The results and targets were a relief to analysts who had been concerned that NYCB might miss its earnings report deadline. The bank did not release Wednesday’s results until late Tuesday.
“Overall, we believe the outcome is better than worst-case concerns,” analysts led by Jefferies’ Ken Usdin said in a note, citing a “reasonable” amount of reserve additions. Stated.
