New York Community Bancorp, a regional lender grappling with recent stock depreciation and a credit downgrade by Moody’s Investors Service, sought to reassure investors on Wednesday. Despite losing about 60% of its stock value over the past eight days, the bank’s new executive chairman, Alessandro DiNello, emphasized the institution’s robust foundation and increased deposits during a call with investors.
DiNello highlighted the steady deposit base, citing “virtually no deposit outflow” from retail branches in recent weeks. The bank also announced DiNello’s appointment, previously the president of Flagstar Bank, as well as plans for new executives to bolster risk management amid stock volatility.
According to DiNello, NYCB has witnessed an overall increase in deposits, buoyed by strong performance across various sectors including private banking and mortgages. Despite these assurances, investors remained skeptical, leading to a further 12% decline in stock value on Wednesday morning.
While the bank holds approximately $83 billion in total deposits, with $22.9 billion uninsured, its liquidity stands at $37.3 billion, surpassing uninsured deposits with a coverage ratio of 163%. Despite the Moody’s downgrade, NYCB’s deposit ratings from various agencies remain investment grade.
JPMorgan’s downgrade of NYCB’s stock further underscored concerns, citing challenges in raising long-term debt. DiNello outlined plans to mitigate risks, including reducing exposure to the commercial real estate market, particularly impacted by changing dynamics due to the pandemic and rising interest rates.
Regulators, including the Federal Reserve, are closely monitoring the situation. While acknowledging the sector’s challenges, they are focused on addressing risks on a case-by-case basis, with particular attention to commercial real estate loan exposures.
As NYCB navigates these challenges, the banking industry grapples with concerns surrounding commercial real estate, emphasizing the need for prudent risk management and regulatory oversight to mitigate potential systemic risks.