Shares of New York Community Bancorp (NYCB) experienced a significant drop of over 26% on Friday following the announcement of a leadership change and the disclosure of internal control issues. The regional lender revealed that Alessandro DiNello, the executive chairman, will now take on the roles of president and CEO, effective immediately. This news comes as NYCB has been facing mounting pressure due to concerns about its exposure to commercial real estate.
The decline in NYCB’s shares was particularly pronounced during after-hours trading. Additionally, the bank amended its fourth-quarter results to include a disclosure about its internal risk management. In a filing with the U.S. Securities and Exchange Commission, NYCB stated that it had identified material weaknesses in its internal controls related to internal loan review, which resulted from ineffective oversight, risk assessment, and monitoring activities.
Alessandro DiNello, who previously served as the CEO of Flagstar Bank before NYCB acquired it in 2022, was appointed as executive chairman of NYCB earlier this month. This decision came shortly after Moody’s Investors Service downgraded the bank’s credit rating to junk status. DiNello expressed confidence in the bank’s future, stating, “While we’ve faced recent challenges, we are confident in the direction of our bank and our ability to deliver for our customers, employees, and shareholders in the long-term. The changes we’re making to our Board and leadership team are reflective of a new chapter that is underway.”
In addition to the leadership change, NYCB also announced the elevation of Marshall Lux to presiding director of the NYCB board, replacing Hanif Dahya. Lux previously served as the global chief risk officer for Chase Consumer Bank at JP Morgan from 2007 to 2009.
The decline in NYCB’s shares is part of a larger trend, with a year-to-date decrease of 53%. This decline was triggered by NYCB’s disclosure on January 31 that it had taken a larger-than-expected charge against potential loan losses. This revelation reignited fears about the state of the commercial real estate market and raised concerns about regional banks in general. In 2023, several regional banks failed as customers and investors grew uneasy about the value of debt on bank balance sheets, including Silicon Valley Bank. Interestingly, NYCB was the acquirer of one of these failed banks, Signature, in March of last year.
The recent developments at NYCB have undoubtedly raised questions about the bank’s stability and ability to navigate the challenges ahead. However, DiNello’s optimistic outlook and the changes being implemented within the leadership team suggest that NYCB is determined to overcome these obstacles and emerge stronger in the long run. As investors closely monitor the situation, it remains to be seen how NYCB will address its internal control issues and regain investor confidence in the midst of a challenging economic landscape.