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Moody’s Downgrades NYCB Debt


New York Community Bancorp (NYCB) received a debt downgrade from Moody’s on Tuesday evening, further exacerbating the challenges facing the regional lender. The bank’s shares had already plummeted to their lowest level since 1997.

In premarket trading on Wednesday, NYCB stock experienced a 10% decline, falling to $3.76 after a 22% drop during Tuesday’s session. The bank is still grappling with its recent earnings report, which revealed wider-than-expected loan losses and a dividend reduction.

NYCB’s underlying issues are rooted in its loans related to commercial real estate, an area that has experienced a decline in value over the past two years due to higher interest rates. This situation serves as a reminder to investors of the regional bank turmoil witnessed last year with the collapses of First Republic Bank, Silicon Valley Bank, and Signature Bank.

The troubles faced by NYCB can also be attributed to its acquisition of Signature Bank, which resulted in the bank surpassing a regulatory threshold that now mandates higher capital reserves.

According to Moody’s, the rating downgrade reflects “multi-faceted financial, risk-management, and governance challenges” confronting NYCB. Moody’s further noted that investor confidence in the bank has faltered, given its exposure to commercial real estate lending and the unexpected losses from its New York office and multifamily property loans.

During a House committee hearing on Tuesday, Treasury Secretary Janet Yellen expressed concern about commercial property loans, a sentiment that resonates with regulators. Furthermore, NYCB confirmed the departure of Nicholas Munsun, its chief risk officer, earlier this year.

In premarket trading, the SPDR S&P Regional Banking ETF experienced a 0.5% decline. Individual regional banks exhibited mixed performance: Valley National Bancorp fell 1%, Columbia Banking System rose by 0.2%, and Bank OZK declined by 0.2%.

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