New York Community Bancorp (NYCB.N), opens new tab shares fell about 26% on Friday after it changed its CEO, disclosed a fourth-quarter loss 10 times larger than expected, and identified "material weaknesses" in internal controls relating to a loan review.
Since NYCB shares are down 65% this year, the news alarmed investors. "NYCB looks like an out-of-control bank, and it seems likely that they will have to take even steeper loan loss provisions," said Opimas LLC CEO Octavio Marenzi.
NYCB has been under pressure since cutting its dividend and reporting a surprising fourth-quarter loss on Jan. 31 due to greater Commercial Real Estate loan provisions.
The lender raised its quarterly loss to $2.7 billion late Thursday, citing a $2.4 billion goodwill impairment from 2007 and earlier deals. The lender lost $900 million on Friday, increasing its market worth fall to roughly $5 billion since Jan. 31.
NYCB said its Thursday shortcomings were connected to "ineffective oversight, risk assessment and monitoring activities," but would not affect fiscal 2023 financial performance. Citigroup analyst Keith Horowitz said material weakness was more concerning than impairment. "Significant changes will need to be made with respect to how they monitor credit risk, which we expect may lead to them being more proactive on recognizing issues," stated.
NYCB said its annual report to the SEC in 15 days will describe the remedy strategy. NYCB has a modest concentration of uninsured deposits and declared last month it has the cash to offer increased deposit insurance.
"The company has strong liquidity and a solid deposit base, and I'm confident we will execute on our turnaround plan to deliver increased shareholder value," stated the new CEO.
But Zacks Investment Management client portfolio manager Brian Mulberry said he would be "very cautious" of the stock. "Transparency is receding and a change in management could cause a loss of confidence from depositors," stated.
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