New York Community Bancorp (NYSE: NYCB) stock rebounded on Wednesday after the company provided an update regarding its liquidity and deposits. This development followed Moody’s decision to downgrade the lender’s credit rating by two notches to junk status.
New York Community Bancorp (NYCB) attempted to reassure investors about its financial health after its credit rating was downgraded to “junk” status.
NYCB shares recovered slightly on Wednesday but remain down more than 55% for the week. Last Wednesday, the bank disclosed notable losses on certain commercial real estate loans and conveyed challenges in assimilating the acquisition of Signature Bank from the past year.
Liquidity Assurance from NYCB
Alessandro DiNello, the bank’s new executive chairman, addressed investors during a conference call on Wednesday morning, stating,
“We have been dealing with a very serious situation since our fourth-quarter earnings release.”
DiNello assured investors that the bank possessed ample liquidity to safeguard deposits and pledged swift action to divest assets or restructure its balance sheet to align with market requirements.
“The challenge today is not easy. But this company has a strong foundation, strong liquidity, and a strong deposit base, which gives me confidence for our path forward.”
In 2023, New York Community Bancorp (NYSE: NYCB) transformed from a low-profile regional lender to a leading banking institution after acquiring most of Signature Bank’s assets. The acquisition came as Signature Bank, among two banks, faced failure over a single weekend in mid-March. The absorption of Signature’s assets propelled NYCB’s total holdings above $100 billion, subjecting it to heightened regulatory scrutiny.
The bank had to slash its dividend while boosting its capital and liquidity ratios to comply with regulators’ requirements.
In addition, investors have expressed concerns regarding NYCB’s commercial real estate holdings. The bank unexpectedly reported a fourth-quarter loss of $252 million, primarily attributed to a provision for credit losses of $552 million, with a significant portion linked to real estate.
Despite the market’s concerns, the bank reassures that there has been minimal depletion of deposits. Last year, Silicon Valley Bank faced a similar situation when nervous affluent depositors hastily withdrew their funds, akin to a contemporary bank run, ultimately leading to its downfall.
Moody’s Downgrades NYCB Credit Rating
Moody’s, the ratings agency, downgraded the bank’s credit rating to junk status on Tuesday. This decision was prompted by concerns over the bank’s concentration in commercial real estate and its high volume of uninsured deposits.
Moody’s said at the time,
“Today’s rating action reflects multi-faceted financial, risk management and governance challenges facing NYCB.”
NYCB responded by issuing a press release stating that 72% of its deposits are insured and highlighted its liquidity of $37.3 billion, surpassing uninsured deposits or those above $250,000.
Thomas Cangemi, NYCB’s president and CEO, said,
“Despite Moody’s ratings downgrade, our deposit ratings from Moody’s, Fitch and DBRS remain investment grade.”
“The Moody’s downgrade is not expected to have a material impact on our contractual arrangements.”
NY Community Bancorp (NYSE: NYCB) Stock Price Action
NYCB stock surged 6.67% to close at $4.48 on Wednesday. The traders had exchanged hands with 172,265,192 (172.26 million) shares compared to the average daily trading volume of 16.39 million.