Community Bank of New York seeks to reassure investors after Moody's downgrade

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US regional lender New York Community Bancorp has seen its share price halve after a week and was downgraded to “junk” status by Moody's.

The bank also announced that Alessandro DiNello, former chief executive of Flagstar Bank, which NYCB acquired in 2022, will take on an executive role.

DiNello served as non-executive chairman, but the lender said he will now become executive chairman and work with Chief Executive Thomas Gangami to “improve all aspects of the bank's operations.”

Shares of NYCB were down about 2 percent by lunchtime in New York on Wednesday. Shares have fallen more than 50 percent in the past week to their lowest level in more than 20 years after the bank reported higher-than-expected losses on real estate loans and cut dividends to meet stricter regulatory requirements.

NYCB's recent losses on property loans have rekindled concerns about a potential default in the real estate market. Its struggles have weighed on other regional U.S. lenders, echoing the pressure the sector came under last year following the failure of Silicon Valley Bank.

DiNello said NYCB is “laser focused” on reducing its exposure to commercial real estate. “Today's challenge is not easy. But the company has strong fundamentals, strong cash flow and a strong deposit base, which gives me confidence in our path forward,” DiNello told analysts.

DiNello also said the bank was open to selling “non-core assets,” without elaborating.

Late on Tuesday NYCB said its total deposits stood at about $83bn – up slightly from $81.4bn at the end of 2023 – and its total liquidity exceeded the level of uninsured deposits backed by the US government, which stands at $250,000.

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However, NYCB has to pay premium rates to keep deposits flowing. While some short-term certificates of deposit continue to pay 5.5 percent annual interest, other banks have scaled back their rates.

The report was followed by a downgrade by ratings agency Moody's on Tuesday, which downgraded the bank's overall credit rating to junk. Fitch, a rival rating agency, downgraded the bank on Friday but left its rating in the investment grade zone.

Moody's said NYCB faced a number of “financial, management and risk management” issues. Even after setting aside an additional $500mn in the most recent quarter, the bank did not have enough reserves to cover potential loan losses, the credit rating agency said.

Cangemi said the Moody's downgrade “is not expected to have a significant impact on our contractual arrangements”.

The bank also said it has started the process of bringing in new chief risk and audit executives with “vast banking experience”. The Financial Times reported this week that NYCB's chief risk officer, Nicholas Munson, left the bank just weeks before it announced unexpected fourth-quarter losses.

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