A photo of a sign above a New York Community Bank branch in Yonkers, New York, USA, on January 31, 2024.
Mike Seeger | Reuters
regional financial company new york community bank As the anniversary of last year’s banking turmoil approaches, the company is clearly in worse trouble.
The troubled lender’s stock rose on Friday after NYCB re-announced a $2.4 billion decline in recent quarterly profits, formally replaced its CEO and postponed the release of its key annual report. Shares plunged 25% to less than $4 per share.
But the most worrying development is directly related to investor anxiety about commercial real estate and the shortfalls the bank has reported in key aspects of its business. NYCB said the lack of oversight led to “significant weaknesses” in the way it reviewed its portfolio. debt.
Raymond James analyst Steve Moss said in a research note Thursday that the disclosures are “a significant concern that suggests credit costs may remain high for an extended period of time.” “This disclosure further reinforces our concerns about NYCB’s interest-only multifamily portfolio, which could require an extended adjustment period unless interest rates decline.”
In a stunning reversal of fortune, a year after regional financial institutions, including Silicon Valley Bank, were consumed by deposit runs, New York CB (which acquired some of Signature Bank’s assets following government seizure and then One company that was seen as a winner is now facing an existential crisis. of itself.
tough quarter
The bank’s trajectory ended a month ago after it released a disastrous fourth-quarter report in which it posted an unexpected loss, cut its dividend and shocked analysts with the level of its loan loss reserves. It suddenly changed.
A few days later, rating agency Moody’s downgraded the bank’s credit rating by two notches to junk, citing concerns about the bank’s ability to manage risk following the departure of NYCB’s chief risk officer and chief audit executive.
At the time, some analysts were reassured by the steps NYCB had taken to strengthen its capital, noting that the promotion of former Flagstar CEO Alessandro Dinero to executive chairman increased confidence in management. The bank’s stock price rose temporarily due to a series of insider purchases that showed executives’ confidence in the bank.
Dinero took over as CEO effective Thursday, following the resignation of his predecessor.
Deposit update?
Now, amid the turmoil, some are questioning the stability of NYCB’s deposits. The bank said last month that it had $83 billion in deposits as of Feb. 5, up slightly from the end of the year. Most of these deposits were insured, meaning the bank had enough funds to draw on even if uninsured deposits were to leave the bank.
DA Davidson analyst Peter Winter said in a note Thursday: “While NYCB has not yet provided an update on deposits, we can only assume that deposits are declining.”
“The question is, how much?” Winter asked. “In our view, corporate treasurers were reevaluating whether to keep their deposits in NYCB when the debt rating was downgraded to junk.”
New York Central Bank Chief Executive Officer Dinero identified the weaknesses exposed Thursday in a statement announcing new chief risk officers and chief audit officers released Friday. We are taking the necessary steps to address it.” He added that banks’ provisions for credit losses are expected to remain unchanged.
“The company has strong liquidity and a solid deposit base, and we are confident that it will be able to execute on its turnaround plan,” Dinero said.
Key stock levels penetrated
With NYCB’s operations and profitability under pressure amid rising interest rates and an uncertain outlook for loan defaults, will NYCB, until recently a serial bank acquirer, be forced to sell to a more stable partner? The question arises.
Ben Emmons, head of fixed income at NewEdge Wealth, said the market perception is that banks trading below $5 a share are at risk of government foreclosure.
A representative for NYCB did not immediately respond to a request for comment.
For now, concerns appear to be limited to NYCB, which has a higher proportion of its loans in commercial real estate than some of its competitors. On Friday, NYCB stock hit a 52-week low of $3.32 per share, while other banking indexes were down only modestly.
“We expect further questions about whether NYCB will be sold,” Citigroup analyst Keith Horowitz said in a note. “However, due to the uncertainty, we don’t see many potential buyers even at this price…In our view, we think NYCB is self-sustaining.”
—CNBC’s Tom Rotunno and Michael Bloom contributed to this article.
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