NEW YORK (AP) – New York Community Bancorp's stock price dropped Wednesday after the bank's credit rating was downgraded to “junk,” raising concerns that the community financial institution could suffer the same fate as Silicon Valley Bank last year. Concerns led to a further 11% drop.
NYCB stock has fallen sharply since last week after the company reported significant losses on some commercial real estate loans and suggested it was struggling to make ends meet last year's acquisition of Signature Bank. After the bank announced its financial results, its stock price fell by about 40%.
NYCB acquired most of Signature Bank's assets last year when the bank collapsed on the heels of Silicon Valley Bank in mid-March. The Signature acquisition makes NYCB a much larger bank in terms of assets, but the law will put it under more pressure from regulators. The bank had to cut its dividend and increase its capital and liquidity ratios to meet regulatory requirements.
There are also concerns about NYCB's commercial real estate portfolio. The bank reported an unexpected loss of $252 million in the fourth quarter, including a $552 million allowance for credit losses, much of which was related to real estate.
The stock fell another 22% on Tuesday. After the market closed, rating agency Moody's downgraded the bank's credit rating to junk. Shares rebounded in premarket trading Wednesday after the bank said 72% of its deposits are insured and it has $37.3 billion in liquidity, more than uninsured deposits. However, after the opening bell, the stock price fell again.
“Despite the downgrade by Moody's, our deposit rating by Moody's, Fitch and DBRS remains investment grade,” said Thomas Cangemi, the bank's chief executive officer. “Moody's downgrade is not expected to have a material impact on our contractual arrangements.”
