New York Community Bancorp’s Credit Rating Downgraded by Fitch and Moody’s
Fitch Ratings Slashes Credit Grade to Junk
New York Community Bancorp’s credit grade has been downgraded to junk status by Fitch Ratings. According to a statement released on Friday, Fitch downgraded the bank’s long-term issuer default rating to BB+, one level below investment grade, from BBB-. This downgrade comes as a result of the bank’s recent discovery of “material weaknesses” in its loan risk tracking processes.
Moody’s Further Lowers Rating
Moody’s Investors Service has also lowered its rating of New York Community Bancorp. In a statement released last month, Moody’s had already downgraded the bank to junk status from a previous rating of Ba2. Now, Moody’s has further lowered its issuer rating to B3.
Bank’s Weaknesses Lead to Evaluation of Loan Provisioning
Fitch Ratings has stated that the discovery of weaknesses in loan risk tracking processes by New York Community Bancorp has prompted a reevaluation of the bank’s controls around adequacy of provisioning, specifically its concentrated exposure to commercial real estate.
Investor Concerns Reignited by NYCB’s Loan Review Announcement
New York Community Bancorp’s recent announcement regarding the need to strengthen its loan reviews has reignited investor concern about the bank’s potential exposure to struggling commercial-property owners, particularly New York apartment landlords. Despite the reassurance that the control weaknesses won’t impact its allowance for credit losses, the bank’s stock experienced a 26% plunge on Friday.
Moody’s Points to Credit Risk and Repricing Risk
Moody’s has highlighted the credit risk associated with NYCB’s office loans and projected that the bank may need to further increase provisions for credit losses over the next two years. The credit rater has also emphasized the substantial repricing risk associated with the bank’s multifamily loans.
NYCB Stock Continues its Decline
Following these rating downgrades and investor concerns, NYCB’s stock ended the week at $3.55, marking a decline of 65% this year.
CEO Expresses Confidence and Focuses on Turnaround
Newly appointed CEO Alessandro DiNello expressed confidence in the bank’s ability to execute its turnaround plan and deliver increased shareholder value. DiNello, who took over this week, mentioned that the company has a solid deposit base and strong liquidity.
Looking Ahead
With NYCB facing credit downgrades and ongoing concerns related to its exposure to struggling commercial-property owners, the bank’s ability to address the identified weaknesses and execute its turnaround strategy will be closely watched by investors and industry observers.
Read More
Click here to read the full story.
Sources:
Most Read from Bloomberg
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.
