Another regional bank is in trouble.
Moody’s Investors Service downgraded a Long Island lender, New York Community Bank – NYCB (NYSE), to junk citing “multi-faceted financial, risk management and governance challenges” after its stock plummeted amid losses on commercial mortgages.
“It downgraded all the bank’s long-term ratings to Ba2 from Baa3, which is junk status, partly on concerns about turnover of the firm’s risk management leaders, and warned the assessments remain on review for further downgrade.” CNBC reported.
“The downgrade reflects Moody’s views that NYCB faces high governance risks from its transition with regards to the leadership of its second and third lines of defense, the risk and audit functions of the bank, at a pivotal time,” Moody’s wrote, according to CNBC. “In Moody’s view, control functions with strong knowledge of a bank’s risks are key to a bank’s credit strength.”
Recall that New York Community Bank last year acquired, through its subsidiary, Flagstar Bank, certain assets and assumed some liabilities of Signature Bank from the FDIC following a run on the bank.
However, nearly one year later, New York Community Bank is now teetering after taking huge losses after it overextended itself on commercial real estate mortgages.
“By NYCB’s own account, 44% of its entire loan book is mortgages to apartment complexes, half of that to rent-stabilized units whose landlords are struggling mightily as their own costs rise.” Semafor reported. “The deposits these banks rely on are a flight risk because more of them exceed the government’s $250,000-per-account insurance limit.”
According to reports, NYCB promoted its chairman Alessandro DiNello to help stabilize the company.
New York Community Bank on Wednesday promoted its chairman to help stabilize the company’s operations, hours after Moody’s Investors Service downgraded the bank’s credit ratings two notches to junk.
Shares gained nearly 7% Wednesday after initially falling as much as 14%. The stock fell more than 20% Tuesday.
NYCB made Alessandro DiNello executive chairman effective immediately, promoting him from nonexecutive chairman, to work with CEO Thomas Cangemi “to improve all aspects of the Bank’s operations,” according to a statement.
The regional bank has been in free fall, shedding more than 50% of its market value across a punishing series of trading sessions, since reporting a surprise fourth-quarter loss last week, along with mounting losses on commercial real estate and the need to slash its dividend by 71% to shore up capital levels.
Last March Moody’s Investors Service cut its outlook for the entire US banking sector to negative and put six banks on ‘downgrade’ watch.
Silicon Valley Bank, First Republic Bank and Signature Bank failed last year after depositors withdrew billions of dollars from the lending institutions.
The post HERE WE GO: Moody’s Downgrades New York Community Bank to Junk After Stock Plummets Amid Losses on Commercial Mortgages appeared first on The Gateway Pundit.