New York Community Bancorp Plunges as CEO Departs and ‘Material Weaknesses’ in Loans are Revealed
Shares of New York Community Bancorp, a major lender to New York City apartment landlords, experienced a significant drop on Friday following the sudden departure of its longtime president and CEO, Thomas Cangemi. The bank also disclosed “material weaknesses” related to loans, further contributing to the decline in share prices. Alessandro DiNello, the executive chairman of the bank’s board, has taken over as the new CEO.
Cangemi had been with the bank for 27 years before stepping down from his leadership roles. The announcement of his departure came alongside the bank’s regulatory filing, which revealed the existence of “material weaknesses” in loan controls. As a result, the bank had to take a $2.4 billion charge. These developments have led to a loss of investor confidence, with shares of the commercial real estate lender bank plummeting almost 30% at the start of Friday’s trading session and currently down nearly 23%. Overall, the bank’s shares have lost more than half their value this year.
The situation has become even more concerning as New York Community Bancorp is unable to file its annual report with the Securities and Exchange Commission. The bank will need to amend its fourth-quarter results due to the identified material weaknesses in loan controls. In a notice to regulators, the bank stated, “As part of management’s assessment of the company’s internal controls, management identified material weaknesses in the company’s internal controls related to internal loan review, resulting from ineffective oversight, risk assessment, and monitoring activities.”
This setback follows the bank’s decision in January to stockpile cash in preparation for possible loan troubles. However, despite these challenges, analyst Steve Moss of Raymond James believes that NYCB’s issues are specific to its multi-family lending and not indicative of a broader banking crisis. Moss argues that the bank’s problems are unrelated to its acquisition of Signature Bank’s assets and suggests that NYCB may have been issuing a significant number of interest-only loans without equity from borrowers. Moss remains optimistic about the bank’s ability to overcome its current difficulties, stating, “There is coverage for uninsured deposits, they should have the liquidity to manage through this difficult time.”
In conclusion, New York Community Bancorp is facing a tumultuous period with the sudden departure of its CEO and the revelation of “material weaknesses” in loan controls. These developments have led to a significant decline in share prices, raising concerns among investors. However, some analysts believe that the bank’s issues are specific to its multi-family lending and do not signal a broader banking crisis. Despite the challenges, there is hope that the bank can navigate through this difficult time with the necessary liquidity and coverage for uninsured deposits.