New York, NY Tuesday, February 13, 2024 – New York Community Bank (NYCB) received three credit downgrades within a week, during the week ending February 9, highlighting deepening concerns about its exposure to the troubled commercial real estate (CRE) market. 1
The latest downgrade, issued by Morningstar DBRS on Thursday, cited “outsized” CRE holdings that the bank plans to reduce in the coming months.
When Moody’s announced its rating downgrade, analysts warned that the bank’s financials could be a symptom of a larger systemic issue. 2
Investors’ anxieties regarding NYCB reached a peak during the week following the disclosure of unexpected losses, a dividend reduction, and its significant CRE exposure.
These factors contributed to a 59% drop in the bank’s stock price within the past month, with an additional 6% decline on Thursday, February 8.
To regain investor confidence, NYCB’s newly appointed executive chairman, Alessandro DiNello, announced potential plans to sell CRE loans or allow them to naturally mature and fall off the books.
In addition, the bank indicated it might shrink its balance sheet by selling non-core assets to strengthen its key capital adequacy ratio.
Treasury Secretary Janet Yellen warned Thursday about potential stress and losses within the CRE market, acknowledging efforts by banking regulators to mitigate these risks.
NYCB increased its capital reserves to comply with stricter regulations implemented after exceeding the $100 billion asset threshold.
- CRE Troubles: https://www.foxbusiness.com/economy/regional-bank-hit-with-third-credit-downgrade-as-crisis-concerns-linger[↩]
- CRE Troubles: https://www.bloomberg.com/news/articles/2024-02-07/new-york-community-bancorp-s-credit-grade-cut-to-junk-by-moody-s[↩]
