Updated March 2nd, 2024 at 15:04 IST

NY Community Bancorp faces investor panic amid leadership change and financial revisions

NYCB had been under pressure following a dividend cut and an unexpected fourth-quarter loss.

Reported by: Business Desk
Representative | Image:Unsplash
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NYCB's investor panic: New York Community Bancorp (NYCB) witnessed a dramatic 26 per cent drop in its shares on Friday, following the replacement of its CEO and the disclosure of a fourth-quarter loss that was significantly higher than previously reported. The bank also revealed the discovery of "material weaknesses" in internal controls related to a loan review process.

Investors, already uneasy, responded with concern, driving NYCB's shares down by 65 per cent since the beginning of the year.

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Octavio Marenzi, CEO of Opimas LLC, commented, "NYCB looks like a bank that is out of control, and it seems likely that they will have to take even steeper charges for loan loss provisions."

The bank's shares closed at $3.55, marking a 25.9 per cent decrease.

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The company had been under pressure following a dividend cut and an unexpected fourth-quarter loss, attributed to higher provisions tied to commercial real estate loans.

The bank revised its quarterly loss to $2.7 billion, primarily due to a $2.4 billion goodwill impairment associated with transactions from 2007 and earlier.

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This announcement led to a market value decline of about $900 million on Friday, resulting in a total loss of market capitalisation of nearly $5 billion since January 31.

Despite the challenges, officials reassured that the disclosed weaknesses would not affect its financial results for fiscal 2023.

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Analysts and rating agencies have responded cautiously, with Fitch Ratings downgrading NYCB and its subsidiary Flagstar Bank and Moody's downgrading the long-term issuer rating.

The company announced a series of executive changes, appointing George Buchanan as chief risk officer and Collen McCullum as chief audit executive. Alessandro DiNello, previously the executive chairman, was appointed president and CEO.

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Chris Marinac, director of research at Janney Montgomery Scott, noted that these changes were necessary to restore investor confidence.

While the situation is seen as unique by some analysts, concerns about regional bank health have been reignited, with the KBW Regional Banking index losing nearly 10 per cent since the quarterly report on January 31.

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(with Reuters inputs)

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Published March 2nd, 2024 at 15:04 IST