Wedbush’s David Chiaverini believes local banks should be able to weather the recent financial storm with a “Cramman countdown.”
New York Community Bancorp is seeking to raise equity capital to shore up confidence in struggling community financial institutions.
Worried by concerns about potential losses on real estate loans, weak internal controls and a sharp decline in stock prices, NYCB sent bankers to gauge investor interest in buying the company’s stock, the people said.
There can be no assurance that an agreement will be reached or that it will be successful in addressing the Bank’s challenges. As of Wednesday morning, the bank’s stock price had fallen about 70% since January.
NYCB replaces CEO, points out ‘material weaknesses’
NYCB has been in crisis mode since January, when it announced signs of trouble in its commercial real estate book, falling into the red in the fourth quarter and cutting its dividend. And last week, the bank said it had discovered “significant weaknesses” in the way it evaluates and monitors loans. This disclosure led to several credit rating downgrades.
The bank’s woes have once again dispelled concerns about a banking crisis, following the collapse of three regional financial institutions about a year ago.
New York Community Bankcorp
Of particular concern to investors is NYCB’s focus on lending to rent-stabilized buildings in New York City. The market has been struggling with rising interest rates and a 2019 law that capped how much landlords could increase rent on some properties. About half of NYCB’s multifamily loan portfolio is rent-regulated.
February 1, 2024 at the headquarters of New York Community Bank (NYCB) in Hicksville, New York. (Photographer: Bing Guan/Bloomberg via Getty Images / Getty Images)
Over the past month, NYCB has overhauled its management and sought to reassure investors by announcing in early February that deposits were stable.
Last week, new executive chairman Alessandro Dinero was appointed CEO, replacing Thomas Cangemi. Dinero previously ran Flagstar Bank, which NYCB acquired in late 2022. The bank also appointed a new chief risk officer and head of audit on Friday. Two of the directors have retired.
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Dinero last month laid out a series of options the bank could consider to shore up its balance sheet, including selling assets from certain non-core businesses. The bank is also considering converting these loans to new financial products that share the risk with outside investors, the people said.
It will be difficult to find takers for these assets, at least at a price that makes them worth the deal, and U.S. officials are considering credit risk transfers that would shift the burden of potential losses to entities outside the regulated banking system. It is showing reluctance to banks that pursue this. .
Both Moody’s Investors Service and Fitch Ratings downgraded New York Community’s credit rating to below investment grade.
