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US regional bank New York Community Bancorp sought to reassure inventors that it was still taking new deposits, after a week in which its share price more than halved and Moody's downgraded its rating to “junk” status.
The bank also announced that Alessandro DiNello, former CEO of Flagstar Bank, which was acquired by New York Commercial Bank in 2022, will assume an executive role.
DiNello had been serving as non-executive chairman, but the bank said he will now become CEO and work with CEO Thomas Cangemi to “improve all aspects of the bank's operations.”
Shares of New York Commercial Bank were down about 2 percent by lunchtime on Wednesday in New York. The stock has already fallen more than 50 percent over the past week to its lowest level in more than 20 years, after the bank reported higher-than-expected losses from mortgages and cut its dividend to meet stricter regulatory requirements.
New York Commercial Bank's recent losses on mortgage loans have renewed concerns about potential defaults in the real estate market. Its difficulties have affected other regional US lenders, echoing the pressures the sector came under last year after the failure of the Silicon Valley bank.
New York Commercial Bank was “very focused on reducing” its exposure to commercial real estate, DiNello said. “Today’s challenge is not easy. But this company has a strong foundation, strong liquidity and a strong deposit base, which gives me confidence in our path forward,” DiNello told analysts.
Dinello added that the bank was open to selling “non-core assets,” without going into further details.
The New York Commercial Bank said late Tuesday that it had total deposits of about $83 billion — up slightly from $81.4 billion at the end of 2023 — and that its total liquidity exceeded the amount of deposits not protected by U.S. government-backed insurance, which is capped at $250. one thousand dollars.
However, the New York Commercial Bank was forced to offer high interest rates in order to maintain the flow of deposits. It continued to pay annual interest of up to 5.5 percent on some short-term certificates of deposit, while other banks cut interest rates.
The statement came following a downgrade by Moody's on Tuesday, which lowered the bank's overall credit rating to junk. Fitch, a rival rating agency, downgraded the bank on Friday but left its rating in the investment grade area.
Moody's said the New York Commercial Bank faced numerous “financial, administrative and risk management” problems. The credit rating group said the bank still lacks sufficient reserves to cover potential loan losses, even after setting aside an additional $500 million in the latest quarter.
Moody's downgrade “is not expected to have a material impact on our contractual arrangements,” Cangemi said.
The bank also said it had begun a process to bring in new risk and audit executives “with significant banking experience.” Nicholas Monson, chief risk officer at New York Commercial Bank, left the bank just weeks before it reported unexpected fourth-quarter losses, the Financial Times reported this week.
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