New York Community Bank (NYCB) was hit with its third credit downgrade as fears linger that the regional bank could be in peril nearly a year after the regional banking sector was hit by a crisis that triggered some of the largest bank failures in U.S. history.
Morningstar DBRS on Thursday downgraded NYCB’s credit rating and cited “outsized” exposure to commercial real estate (CRE) that the bank has pledged to reduce in the months ahead. CRE borrowers have been under pressure due to the higher interest rate environment as well as lower occupancy rates due to the rise of remote work.
The downgrade comes after rating agencies Fitch and Moody’s also lowered NYCB’s ratings in the last week. Last Friday, Fitch cut NYCB’s rating from BBB to BBB-, its lowest investment grade rating, while Moody’s lowered NYCB’s rating to Ba2, a non-investment grade or “junk” tier, on Wednesday.
“Liquidity appears sufficient, but given the bank failures last spring, we remain cautious given that the adverse headline risk, including a significant decline in NYCB’s stock price, could eventually spook customer and depositor confidence,” Morningstar DBRS said of its downgrade.
BANK THAT PURCHASED FAILED COMMUNITY BANK CLOSE TO CREDIT DOWNGRADE
New York Community Bank was hit with its third downgrade in the last week. Photo by Lev Radin/Pacific Press/LightRocket via Getty Images
Investors’ concerns about NYCB came to a head last week after the company posted a surprise loss and announced a dividend cut to boost reserves required by banking regulations, along with its exposure to the CRE market. Those worries sent the bank’s stock plunging to its lowest level since 2000.
READ ON THE FOX BUSINESS APP
NYCB’s management has tried to bolster investor confidence as the company’s stock has fallen over 59% in the last month, including a more than 6% decline during Thursday’s trading. Newly-appointed executive chairman Alessandro DiNello said Wednesday that NYCB will consider the sale of loans in its commercial real estate portfolio or let them run off the balance sheet naturally.
FULL EFFECT OF FED RATE HIKES HAVE NOT BEEN SEEN, BANK OF AMERICA CEO WARNS
New York Community Bank has moved to shore up its reserves and balance sheet amid investors’ concerns about commercial real estate exposure. Photographer: Bing Guan/Bloomberg via Getty Images
The lender also indicated that if necessary, it would consider shrinking its balance sheet by selling non-core assets to shore up its common equity tier 1 ratio, a key measure of financial strength.
Treasury Secretary Janet Yellen said during a hearing Thursday that she expects additional stress and some financial losses due to weakness in the CRE market, but that banking regulators are working with banks to address those risks.
NYCB set aside more capital to meet regulatory requirements for capital and liquidity that came into effect after the bank surpassed the $100 billion in total assets threshold.
New York Community Bank acquired Signature Bank last year after it failed amid the regional banking crisis. Photo by Leonardo Munoz/VIEWpress
NYCB was founded in 1859 and has long served as a small regional bank. Between 2000 and 2023, it completed 13 acquisitions to grow to its current size.
Among those acquisitions was Signature Bank, which failed during last year’s regional banking crisis. It also recently acquired Flagstar Bank, which allowed it to expand its footprint around the country.
Last year’s regional banking crisis saw some of the largest bank failures in U.S. history. First Republic Bank’s failure became the second largest, trailing only Washington Mutual’s failure in 2008 and surpassing the 2023 failures of Silicon Valley Bank and Signature Bank.
Reuters contributed to this report.
Original article source: Regional bank hit with 3rd credit downgrade as crisis concerns linger
News Related-
Russian court extends detention of Wall Street Journal reporter Gershkovich until end of January
-
Russian court extends detention of Wall Street Journal reporter Evan Gershkovich, arrested on espionage charges
-
Israel's economy recovered from previous wars with Hamas, but this one might go longer, hit harder
-
Stock market today: Asian shares mixed ahead of US consumer confidence and price data
-
EXCLUSIVE: ‘Sister Wives' star Christine Brown says her kids' happy marriages inspired her leave Kody Brown
-
NBA fans roast Clippers for losing to Nuggets without Jokic, Murray, Gordon
-
Panthers-Senators brawl ends in 10-minute penalty for all players on ice
-
CNBC Daily Open: Is record Black Friday sales spike a false dawn?
-
Freed Israeli hostage describes deteriorating conditions while being held by Hamas
-
High stakes and glitz mark the vote in Paris for the 2030 World Expo host
-
Biden’s unworkable nursing rule will harm seniors
-
Jalen Hurts: We did what we needed to do when it mattered the most
-
LeBron James takes NBA all-time minutes lead in career-worst loss
-
Vikings' Kevin O'Connell to evaluate Josh Dobbs, path forward at QB