In the midst of the storm, New York Community Bancorp: downgraded to junk status by Moody's, appoints a new chairman of the board.

Wallstreetcn
2024.02.08 09:23
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New York Bank stated that its deposits remained stable at $83 billion, with sufficient resources to cope with any potential outflow of uninsured deposits.

Since the unexpected loss in the fourth quarter earnings report last week, the stock price of New York Community Bancorp has plummeted by over 50%.

To alleviate market panic, on Wednesday, February 7th, New York Community Bancorp appointed Alessandro DiNello as the new Chairman of the Board, effective immediately. DiNello will work closely with CEO Thomas Cangemi to comprehensively improve the bank's operations.

The previous evening, the bank also stated in a declaration that its deposits remained stable at $83 billion, providing sufficient resources to handle any potential uninsured deposit outflows.

According to sources, New York Community Bancorp is currently seeking third-party capital to inject liquidity into its residential mortgage portfolio held by Flagstar Bank. The bank is considering using a $5 billion housing loan portfolio, issued at a lower interest rate, as a support to conduct synthetic risk transfer, which involves transferring such loans to buyers to reduce risk exposure. Additionally, it is exploring the sale of approximately $1 billion in recreational vehicle and boat loan portfolios.

Earlier this week, international rating agency Moody's downgraded New York Community Bancorp's credit rating to "junk" status. Moody's stated that the bank is facing "financial, risk management, and governance challenges," and added that if the situation worsens, it may further downgrade the bank's rating.

As for the cause of the crisis at New York Community Bancorp, it can be traced back to the earnings report. The bank's fourth quarter report, released last week, revealed loan loss provisions that were ten times higher than expected, resulting in a staggering loss of $260 million, a stark contrast to the market's previous estimate of $206 million in net profit. Furthermore, the bank announced a dividend cut to $0.05 per share, far below the market's expected $0.17.

The deeper reason behind this crisis lies in the commercial real estate market. It is an undeniable fact that the risk of commercial real estate has increased in the high-interest rate environment in the United States. The real estate industry is closely tied to the banking industry, and when commercial real estate experiences losses, the bank's loan delinquency rate rises, dragging the banking industry into the whirlpool.