A year after buying a failed bank, New York Community Bancorp is facing difficulties

A New York bank is under intense pressure on Friday, nearly a year after absorbing a large portion of another bank 30 miles away that had… to fail.

Shares of New York Community Bank Bancorp fell at the opening bell after CEO Thomas Cangemi, who spent much of this year reassuring investors about the bank's viability, abruptly stepped down and the bank postponed mandatory annual financial disclosure to US regulators due to “material reasons.” “vulnerability” associated with loans.

Commercial banks like New York Community Bancorp have been hit hard by declining values ​​in the commercial real estate market after the pandemic upended office work for millions.

The bank reported a surprise loss of $252 million for the fourth quarter, including provisions for credit losses of $552 million, mostly related to real estate. Its credit rating was downgraded to “junk” by Moody's.

This pressure was exacerbated at the Hicksville, New York, bank, because it had grown dramatically overnight after absorbing failed banks. Signature Bank.

This has placed New York Community Bancorp at a new level requiring higher regulatory scrutiny, a transition that has been difficult.

The filing late Thursday with the U.S. Securities and Exchange Commission included a $2.4 billion goodwill impairment charge, meaning the bank is reevaluating the value of its assets.

These losses will be recorded retroactively in the bank's fourth quarter, meaning its windfall losses have only multiplied 10-fold.

“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 reviews, resulting from ineffective oversight, risk assessment, and monitoring activities,” the bank said in the filing.

See also  Stock market records worst day of 2023 as rising yields contribute to 'perfect storm'

Bank shares plunged 23% in early trading, impacting other regional banks as well. Its share is now down 65% for the year.

This time last year, Federal Reserve officials played down growing concerns about contagion in the banking sector and President Joe Biden He called for stricter regulations after Two banks failed in one weekend In mid-March.

New York Community Bancorp acquired one such failed bank, Signature, pushing its assets past $100 billion and, by law, putting it under increased regulatory scrutiny.

Industry analysts did not express concerns about any kind of contagion in the banking sector on Friday in light of the unique circumstances leading to recent issuances at New York Community Bancorp, its exposure to commercial real estate and the huge jump in its market value.

“Uncovering a material weakness in the loan review process is important, and significant changes will need to be made in terms of how credit risk is monitored in the future which we expect will result in them being more proactive in identifying problems in the future.” Citi's Keith Horowitz said in a client note.

The delay in the bank's annual report “is likely intended to give auditors enough time to ensure there is no financial impact from a material weakness in the control environment, which would mean plenty of time to test individual loans,” Horowitz said.

Cangemi, who has been with the bank for 27 years, will be replaced as CEO by Alessandro Dinello, executive chairman of the bank's board of directors.

See also  Elon Musk's Twitter bans Aaron Rupar, CNN, NYT, and WaPo journalists without explanation

DiNello was CEO of Flagstar Bank, which was acquired by New York Community Bancorp in late 2022.

Leave a Reply

Your email address will not be published. Required fields are marked *