Another regional bank is in trouble.
Trading of Long Island lender New York Community Bancorp halted on the New York Stock Exchange after its shares tumbled more than 40%.
The Wall Street Journal reported on Wednesday that NYCB is looking for a cash infusion.
Update: NYCB announces $1 billion capital raise on Wednesday afternoon.
“Struggling New York Community Bancorp announced a $1 billion capital raise and a leadership shakeup on Wednesday, headlined by former Treasury Secretary Steve Mnuchin.” CNBC reported.
CNBC reported:
Shares of struggling New York Community Bancorp. fell more than 40% on Wednesday amid reports that the regional bank is seeking a cash infusion.
Reuters and The Wall Street Journal reported on Wednesday that the bank was looking to outside investors for cash to shore up its balance sheet. NYCB did not immediately respond to CNBC’s request for comment.
The stock was halted for news pending when shares were down 42%.
Shares of the bank were already down sharply the day before the reports. The stock is now below $2 per share after starting the year above $10.
A cash infusion would be the latest development in a turbulent start to the year for NYCB. The bank disclosed in late January that it was dramatically raising the allowance for potential loan losses on its balance sheet, with its exposure to commercial real estate being a potential issue. That was followed shortly by Moody’s Investors Service downgrading the bank’s credit rating to junk status, and NYCB naming former Flagstar bank CEO Alessandro DiNello as executive chairman.
Recall that New York Community Bank last year acquired, through its subsidiary, Flagstar Bank, certain assets and assumed some liabilities of Signature Bank from the FDIC following a run on the bank.
However, nearly one year later, New York Community Bank is now teetering after taking huge losses after it overextended itself on commercial real estate mortgages.
“By NYCB’s own account, 44% of its entire loan book is mortgages to apartment complexes, half of that to rent-stabilized units whose landlords are struggling mightily as their own costs rise.” Semafor reported. “The deposits these banks rely on are a flight risk because more of them exceed the government’s $250,000-per-account insurance limit.”
According to reports, NYCB promoted its chairman Alessandro DiNello to help stabilize the company.
Moody’s Investors Service recently downgraded New York Community Bank – NYCB (NYSE), to junk citing “multi-faceted financial, risk management and governance challenges” after its stock plummeted amid losses on commercial mortgages.
“It downgraded all the bank’s long-term ratings to Ba2 from Baa3, which is junk status, partly on concerns about turnover of the firm’s risk management leaders, and warned the assessments remain on review for further downgrade.” CNBC reported.
“The downgrade reflects Moody’s views that NYCB faces high governance risks from its transition with regards to the leadership of its second and third lines of defense, the risk and audit functions of the bank, at a pivotal time,” Moody’s wrote, according to CNBC. “In Moody’s view, control functions with strong knowledge of a bank’s risks are key to a bank’s credit strength.”
DEVELOPING…
