Brendan McDiarmid/Reuters
Trading information for New York Community Bancorp is displayed on a screen on the floor of the New York Stock Exchange (NYSE) on January 31, 2024 in New York City, USA.
CNN
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Embattled local bank New York Community Bancorp suffered another blow Tuesday night as Moody's Investors Service downgraded its credit rating to junk status.
Moody's on “challenges” facing New York Community Bancorp after the company shocked Wall Street last week by revealing unexpected losses on exposure to the depressed commercial real estate market. The company stated that concerns about the issue were a factor in the downgrade. The downgrade lowered the bank's credit rating by two notches from its previous level, indicating a significant loss of confidence in the bank's ability to repay its debtors.
“An unexpectedly significant loss of NYCB's core historic commercial real estate lending portfolio, New York office and multifamily properties, could trigger potential confidence sensitivity,” Moody's said in a report. .
New York Community Bancorp's stock price fell 17% in after-hours trading Tuesday night following the downgrade. This loss came on top of a 22% plunge during regular trading.
Credit rating downgrades could further increase borrowing costs and make life even more difficult for distressed companies.
Moody's considers New York Community Bancorp's funding and liquidity to be “relatively weak” compared to its peers, relying on market-sensitive wholesale funding, and in times of stress, its funding may decline. He warned that it could run out.
Additionally, Moody's noted that one-third of the bank's deposits are uninsured. Last year, uninsured deposits at Silicon Valley banks were ripped off by nervous customers, leading to a classic bank run.
“If depositor confidence erodes, the bank could face significant funding and liquidity pressures,” Moody's said.
New York Community Bancorp has lost more than half its market value since disclosing unexpected losses a week ago, cutting its dividend and sharply increasing its loan loss reserves.
Moody's is reviewing New York Community Bancorp's credit rating, indicating the possibility of further downgrades.
New York Community Bancorp did not respond to a request for comment.
Treasury Secretary Janet Yellen declined to comment specifically on the New York Community Bancorp issue during Tuesday's hearing.
But Yellen told the House Financial Services Committee that U.S. officials are “closely monitoring the current banking stress” and that regulators are working with banks to help them manage the risks they face from distressed real estate loans. Ta.
“I'm concerned. Some institutions may be quite stressed out about this issue, but I believe this issue is manageable,” Yellen said.
