New York Community Bancorp Inc.’s stock reversed course and rose Wednesday as the bank reassured investors by saying it has “ample” liquidity and that total deposits have increased in the last several weeks.
In a conference call with analysts, the bank’s newly named executive chair, Alessandro P. DiNello, said the bank has “obviously been dealing with a very serious situation. … But [what] I hope to do this morning is instill some confidence that this bank remains strong and will get itself back on the right track.”
The bank also plans to name a new chief risk officer “in the very near future,” he said.
The comments came after New York Community Bancorp sustained cuts to its debt rating at Moody’s and Fitch, as well as a fresh stock downgrades from J.P. Morgan and BofA Securities.
Separately, the Hicksville, N.Y.-based bank has offered investors a chance to bid on a $22.4 million mortgage backed by three five-story walk-up apartment buildings in Washington Heights, a neighborhood in northern Manhattan, according to details of the offering viewed by MarketWatch.
Also read: New York Community Bancorp looks to sell rent-regulated commercial real estate after surprise quarterly loss
Amid volatile trading, New York Community Bancorp’s stock
rose nearly 7% to $4.49 in afternoon trading after losing ground earlier in the day.
Also read: New York Community Bancorp led increase in loan-loss reserves by big regional banks as lenders brace for potential downturn
Moody’s cut the bank’s credit to a speculative grade, or “junk,” rating, citing financial, risk-management and governance challenges.
In a statement, New York Community Bancorp Chief Executive Thomas Cangemi said deposit ratings remain investment grade.
“The Moody’s downgrade is not expected to have a material impact on our contractual arrangements,” Cangemi said.
The bank reported an increase in deposits to $83 billion as of Feb. 5, up from $81.4 billion on Dec. 31.
The bank also reported total liquidity of $37.3 billion, which exceeded uninsured deposits of $22.9 billion, with a coverage ratio of 163%. Cash held on the balance sheet totaled $17 billion.
Earlier in the day, the bank named board member DiNello as executive chair to “work alongside” Cangemi in an effort to “improve all aspects of the bank’s operations.”
DiNello had been nonexecutive chair of the board after previously working for nine years as chief executive of Flagstar Bank, which New York Community Bancorp acquired in 2022.
He told analysts the bank plans to do “whatever it takes” to build up its capital ratios, as deposits remain strong.
The bank is also reviewing its loan portfolio “to build a fortress balance sheet,” DiNello said, adding that it has curtailed its originations in commercial real estate in recent months and is reducing its concentration in its loan portfolio.
Meanwhile, Bloomberg reported that New York Community Bancorp is considering a so-called synthetic risk transfer, which would be backed by a $5 billion portfolio of home loans. The news service cited unnamed sources familiar with the situation.
Synthetic securitization allow banks to sell their exposure to loans
by transferring the risk of the assets to the buyer.
The bank may also sell a portfolio of about $1 billion of recreational-vehicle and marine loans, Bloomberg reported.
Analyst downgrades hound stock
Saying the bank’s “high risk profile” has pushed the stock out of its comfort zone, J.P. Morgan analyst Steven Alexopoulos downgraded New York Community Bancorp to neutral from overweight and cut the stock’s price target to $5.50 a share from $11.50 a share.
Alexopoulos said the bank confirmed reports by Bloomberg and the Wall Street Journal that its chief risk officer and chief audit executive had left the bank.
“The departures of key executives in times of stress will heighten investor concerns,” Alexopoulos said in a research note.
BofA Securities analyst Ebrahim H. Poonawala cut his rating on the stock to neutral from buy and reduced the stock’s target price to $5 from $8.50 a share.
“We believe the persistent sell-off in the stock over the last two days on perceived risks tied to the commercial real estate (CRE) book and the heightened degree of regulatory scrutiny is likely to weigh on the earnings outlook and on investor sentiment to add exposure to the stock,” Poonawala said. “While we believe that the bank has enough liquidity to navigate the current period … the elevated headline risk has the potential to influence customer behavior, leading to a greater-than-expected increase in the cost of deposits.”
Reacting to the bank’s statement on deposits, Citi analyst Keith Horowitz reiterated a neutral rating on New York Community Bancorp and said the stock faces “near-term pressure on profitability” due to its announced shift in deposits away from uninsured deposits.
“NYCB is down significantly since earnings, and the lower stock price has fueled concerns about pressure on deposits, plus we got news of the departure of the chief risk and audit officers followed by Fitch downgrades,” Horowitz said.
The junk rating on the bank’s debt “may cause further stock pressure” while making it more challenging for New York Community Bancorp to issue debt, he said.
The bank’s latest statement shows a decline in uninsured deposits but also a strong liquidity position, he noted.
On Tuesday, the stock fell 22% after the bank confirmed the report that its chief risk officer had left and after U.S. Treasury Secretary Janet Yellen said she was concerned about challenges facing regional banks.
Meanwhile, Fitch cut its long-term issuer default ratings to one notch above junk, to BBB- from BBB, with a negative outlook, saying the timing of the bank’s announced actions to meet its Category IV bank regulatory challenges “were outside of Fitch’s baseline expectations.”
The stock has tumbled 56.3% over the past three months through Tuesday, while the S&P 500
has gained 13.2%.
The latest trouble began last week, when the stock was crushed after the bank reported a surprise loss and a dividend cut.
Also read: New York Community Bancorp’s stock crushed on surprise loss, dividend cut and cost of two loans