New York
New York Community Bancorp shares faced a 9.5% decline before the opening bell on Wednesday, indicating another challenging trading session ahead. Analysts’ expressions of caution regarding “governance risks” at the bank have contributed to investor concerns.
The bank reported a surprise quarterly loss last week and set aside significant provisions for potential bad loans linked to the commercial real estate (CRE) sector, which reverberated across the industry.
On Tuesday, NYCB announced its search for candidates to fill the chief risk officer (CRO) and chief audit executive positions after news of their departures surfaced, initially reported by Bloomberg.
The bank stated that it currently has interim personnel in those roles who are qualified to handle their responsibilities.
J.P. Morgan, despite maintaining its “overweight” rating, expressed surprise that news of these departures, particularly concerning the CRO role, did not originate directly from NYCB.
The brokerage expressed concerns that NYCB’s decision not to disclose the departures of key executives during challenging times would heighten investor apprehensions. Consequently, the brokerage downgraded the stock to “neutral” and reduced its price target from $11.5 to $5.5. The stock, which has reached lows not witnessed since 1997, traded at $3.78 before the bell, marking a 31% difference from J.P. Morgan’s revised target.
Notably, at least 14 brokerages have either reduced their price targets or revised their ratings on the stock. On Tuesday, Moody’s downgraded the bank’s credit rating to junk status and cautioned about potential further downgrades.
Moody’s cited NYCB’s high governance risks due to the transition in the leadership of its risk and audit functions during a critical period. NYCB CEO Thomas Cangemi noted that Moody’s downgrade wasn’t anticipated to have a significant impact on the bank’s contractual arrangements.
In an effort to reassure investors, the bank provided some details regarding its financial position. It highlighted that total deposits had increased to $83 billion from $81.4 billion by the end of 2023. Additionally, total liquidity stood at $37.3 billion, exceeding uninsured deposits.