The New York Community Bank (NYCB) headquarters in Hicksville, New York, USA, on Thursday, February 1, 2024.
Bing Guan | Bloomberg | Getty Images
New York Community Bank promoted its chairman on Wednesday to help stabilize the company’s operations, hours after Moody’s Investors Service downgraded the bank’s credit rating by two notches to junk.
Shares fell as much as 13% on Wednesday morning but recovered to fall about 2% in the afternoon. The stock fell more than 20% on Tuesday.
NYCB named Alessandro DiNello executive chairman effective immediately, promoting him from non-executive chairman to work with CEO Thomas Cangemi “to improve all aspects of the bank’s operations,” it said in a statement.
The regional bank has been in free fall, losing nearly 60% of its market value in a series of tough trading sessions since it reported a surprise fourth-quarter loss last week, along with mounting losses in commercial real estate and the need to cut its dividend increase 71% to strengthen capital.
The measures renewed concerns that some small and medium-sized banks could come under pressure from declines in profitability and losses in real estate holdings.
NYCB’s announcement addresses management concerns that emerged following last week’s earnings report. The Hicksville, New York-based lender raised over $100 billion in assets after two acquisitions – Flagstar Bank in late 2022 and Signature Bank assets in March 2023 – but then appeared caught off guard by increased regulatory scrutiny , after crossing this threshold.
DiNello, who had served as CEO of Flagstar Bank since 2013, joined NYCB after the acquisition was completed.
Alessandro DiNello, President and CEO of Flagstar Bancorp Inc., listens during the 110th NAACP Annual Convention in Detroit, Michigan, U.S., on Wednesday, July 24, 2019.
Anthony Lanzilote | Bloomberg | Getty Images
Moody’s cited “multifaceted financial, risk management and governance challenges” at NYCB in its note late Tuesday downgrading the bank.
It downgraded all of the bank’s long-term ratings from Baa3, meaning junk status, to Ba2, in part due to concerns about the turnover of the company’s risk management executives, and warned that the ratings remain under review for further downgrade.
“The downgrade reflects Moody’s view that its transition exposes NYCB to high governance risks with respect to the leadership of its second and third lines of defense, as well as the bank’s risk and audit functions, at a critical time,” Moody’s wrote. “In Moody’s view, control functions with in-depth knowledge of a bank’s risks are key to a bank’s credit strength.”
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NYCB stock.
The bank is looking for a chief risk officer and chief audit executive and has managers to fill those positions on an interim basis, NYCB said in a statement overnight. Previous executives in those roles left the bank in the months before its disastrous earnings report last week, Bloomberg reported.
NYCB also said the downgrade is not expected to have a “material impact on our contractual arrangements.”
Uninsured deposits
The bank sought to boost confidence by releasing unaudited financial information on Monday, saying that 72% of total deposits were either insured or collateralized and that it had sufficient liquidity to cover uninsured deposits.
During last year’s regional banking crisis, institutions such as Silicon Valley Bank and First Republic were stripped of their deposits after customers withdrew cash from the banks.
In a call with investors Wednesday morning, DiNello acknowledged the gravity of the situation NYCB suddenly finds itself in.
“We took some hard, hard punches in the gut, but we are strong and like I said, look at the depth of this organization,” DiNello said. “I mean, does anyone think they could be higher today than they were at the end of the year given what we’ve been through here? I mean, come on.”
NYCB has seen “virtually no deposit outflow” from retail branches, he said.
—CNBC’s Ritika Shah contributed to this report.
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2024-02-07 18:22:16
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