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CNBC's Kate Rogers joins 'Closing Bell Overtime' with breaking news on two announcements from NYCB.
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Tag: New York Community Bancorp Inc.
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Shares of NYCB fall more than 20% after bank discloses ‘internal controls’ issue, CEO change
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A New York Community Bank stands in Brooklyn, New York City, on Feb. 8, 2024.
Spencer Platt | Getty Images
Shares of New York Community Bancorp fell more than 20% in extended trading Thursday after the regional lender announced a leadership change and disclosed issues with its internal controls.
The regional bank announced that Alessandro DiNello, its executive chairman, is taking on the roles of president and CEO, effective immediately. NYCB has been under pressure in recent months due in part to concerns about its exposure to commercial real estate.
Shares of NYCB dropped sharply in after hours trading.
The bank also announced an amendment to its fourth-quarter results, adding a disclosure about its internal risk management.
“As part of management’s assessment of the Company’s internal controls, management identified material weaknesses in the Company’s internal controls related to internal loan review, resulting from ineffective oversight, risk assessment and monitoring activities,” the company said in a filing with the U.S. Securities and Exchange Commission.
DiNello previously served as the CEO of Flagstar Bank, which NYCB acquired in 2022. He was named executive chairman at NYCB earlier in February just after Moody’s Investors Service downgraded the bank’s credit rating to junk status.
“While we’ve faced recent challenges, we are confident in the direction of our bank and our ability to deliver for our customers, employees and shareholders in the long-term. The changes we’re making to our Board and leadership team are reflective of a new chapter that is underway,” DiNello said in a press release Thursday.
In another leadership change, Marshall Lux was elevated to presiding director of the NYCB board, replacing Hanif Dahya. Lux served as global chief risk officer for Chase Consumer Bank at JP Morgan from 2007 to 2009, according to the press release.
Shares of NYCB are down 53% year to date, sparked by its disclosure on Jan. 31 that it took a larger-than-expected charge against potential loan losses.
The specter of loan losses reignited fears about the state of the commercial real estate market and regional banks more broadly. Several regional banks failed in 2023 after customers and investors became uneasy about the value of the debt on bank balance sheets, including Silicon Valley Bank.
NYCB was actually the acquirer of one of those failed banks, Signature, in March of last year.
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Valley National Bank CEO on NYCB closure and dealings with regulators
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Ira Robbins, Valley National Bank chairman and CEO, joins ‘Power Lunch’ to discuss the chief executive’s sentiment after hearing news about New York Community Bank, how Robbins would characterize their interactions with regulators, and more.
04:15
Thu, Feb 22 20243:18 PM EST
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Fallout from the NY Community Bancorp unlikely to impact Fed policy: Damped Spring Advisors CEO
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Damped Spring Advisors CEO Andy Constan joins ‘Fast Money’ to talk fallout from NYCB’s recent downturn and the state of the banking and financial sector.
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NYCB woes reignite fears about shaky banks as anniversary of March crisis nears
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The New York Community Bank (NYCB) headquarters in Hicksville, New York, US, on Thursday, Feb. 1, 2024.
Bing Guan | Bloomberg | Getty Images
Embattled lender New York Community Bank disclosed a litany of financial metrics in the past 24 hours in a bid to soothe skittish investors.
But one of the most crucial resources for any bank appears to be in short supply for NYCB lately: confidence.
The regional bank late Tuesday said that deposits were stable at $83 billion and that the firm had ample resources to cover any possible flight of uninsured deposits. Hours later, it promoted chairman Alessandro DiNello to a more hands-on role in management.
The moves spurred a 6% jump Wednesday in NYCB shares, a small dent in the stock’s more than 50% decline since the bank reported fourth-quarter results last week. Shares of the Hicksville, New York-based last traded for about $4.48 per share.
“There’s a confidence crisis here,” said Ben Emons, head of fixed income at NewEdge Wealth. “The market doesn’t have belief in this management.”
Amid the freefall, ratings agency Moody’s cut the bank’s credit ratings two notches to junk, citing risk management challenges while the firm searches for a pair of key executives. Making matters worse, NYCB was hit with its first shareholder lawsuit Wednesday over the share collapse, alleging that executives misled investors about the state of its real estate holdings.
The sudden decline in NYCB, previously deemed one of last year’s winners after acquiring the assets of Signature Bank, reignited fears over the state of medium-sized American banks. Investors have worried that losses on some of the $2.7 trillion in commercial real estate loans held by banks could trigger another round of turmoil after deposit runs consumed Silicon Valley Bank and Signature last March.
Real estate
Last week, NYCB said it was forced to stockpile much more cash for losses on offices and apartment buildings than analysts had expected. Its provision for loan losses surged to $552 million, more than 10 times the consensus estimate.
The bank also slashed its dividend by 71% to conserve capital. Companies are usually loath to cut dividends because investors favor firms that make steady payouts.
The NYCB results sent shares of regional banks tumbling because that group plays a relatively large role in the country’s commercial real estate market compared to the megabanks, while generally reserving less for possible defaults.
Shares of Valley National, another lender with a larger weighting to commercial real estate, have declined about 22% in the past week, for instance.
NYCB’s results “shifted investor sentiment back towards the risk of an acceleration in CRE nonperforming loans and loan losses over the course of 2024,” Morgan Stanley analyst Manan Gosalia wrote Wednesday in a research note.
Despite a suddenly low valuation, “the perceived risk tied to all things commercial real estate is also likely to weigh on investor appetite to step in,” Bank of America analyst Ebrahim Poonawala wrote Wednesday. He rates NYCB “neutral” and has a $5 price target.
Office buildings are at greater risk of default because of lower occupancy rates with the rise in remote and hybrid work models, and changes in New York’s rent stabilization laws have made some multifamily dwellings plunge in value.
“People thought that office space is where the stress is; now we’re dealing with rent-controlled properties in New York City,” Emons said. “Who knows what will happen next.”
Institutions ‘stressed’
Emons noted that, much like during the March tumult, speculators have piled into trades betting that NYCB shares would decline further.
In particular, activity for put options that pay off if NYCB stock falls to $3 or lower have surged, he said. A put is a financial contract that gives the buyer the right to sell a stock at a predetermined price and within a specific time.
On Tuesday, Treasury Secretary Janet Yellen said she was “concerned” about losses in commercial real estate, but that bank regulators were working to make sure that the financial system would adjust.
“I believe it’s manageable, although there may be some institutions that are quite stressed by this problem,” Yellen said, declining to speak about any specific bank.
That jibes with the view of Wells Fargo analysts that regulators are likely to take a more critical stance on reserving for possible loan losses after the NYCB flare up.
“A tougher look at credit likely leads to more write-offs, which can lead to more capital needs,” wrote Wells Fargo analysts led by Mike Mayo.
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NYCB shares jump after bank names new chairman following credit rating downgrade
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CNBC's Becky Quick reports on the latest news.
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NYCB names new chairman after Moody’s downgrades bank’s credit rating to junk
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The New York Community Bank (NYCB) headquarters in Hicksville, New York, US, on Thursday, Feb. 1, 2024.
Bing Guan | Bloomberg | Getty Images
New York Community Bank on Wednesday promoted its chairman to help stabilize the company’s operations, hours after Moody’s Investors Service downgraded the bank’s credit ratings two notches to junk.
Shares gained nearly 7% Wednesday after initially falling as much as 14%. The stock fell more than 20% Tuesday.
NYCB made Alessandro DiNello executive chairman effective immediately, promoting him from nonexecutive chairman, to work with CEO Thomas Cangemi “to improve all aspects of the Bank’s operations,” according to a statement.
The regional bank has been in free fall, shedding more than 50% of its market value across a punishing series of trading sessions, since reporting a surprise fourth-quarter loss last week, along with mounting losses on commercial real estate and the need to slash its dividend by 71% to shore up capital levels.
The moves reignited concerns that some small and medium-sized banks could be squeezed by declines in profitability and losses on real estate holdings.
NYCB’s announcement addresses concerns over management that emerged after last week’s earnings report. The Hicksville, New York-based lender vaulted over $100 billion in assets after a pair of acquisitions — Flagstar Bank in late 2022 and the assets of Signature Bank in March 2023 — but then appeared to be caught off guard by heightened regulatory scrutiny after crossing that threshold.
DiNello, who was CEO of Flagstar Bank since 2013, joined NYCB after the acquisition closed.
Alessandro DiNello, president and chief executive officer of Flagstar Bancorp Inc., listens during the 110th NAACP Annual Convention in Detroit, Michigan, U.S., on Wednesday, July 24, 2019.
Anthony Lanzilote | Bloomberg | Getty Images
Moody’s cited “multi-faceted financial, risk-management and governance challenges” at NYCB in its note late Tuesday downgrading the bank.
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.
“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. “In Moody’s view, control functions with strong knowledge of a bank’s risks are key to a bank’s credit strength.”
NYCB stock.
The bank is searching for a chief risk officer and chief audit executive and has managers serving on an interim basis in those positions, NYCB said in an overnight statement. Former executives in those roles left the bank in the months before its disastrous earnings report last week, Bloomberg reported.
NYCB also said the downgrade isn’t expected to have a “material impact on our contractual arrangements.”
Uninsured deposits
The bank sought to boost confidence by issuing unaudited financial information as of Monday, stating that 72% of total deposits were either insured or collateralized, and that it had ample liquidity to cover uninsured deposits.
During last year’s regional banking crisis, institutions including Silicon Valley Bank and First Republic were drained of deposits after customers pulled cash from the banks.
In a call Wednesday morning with investors, DiNello acknowledged the gravity of the situation NYCB suddenly finds itself in.
“We got a couple of tough, tough punches to the gut, but we’re strong and as I said, look at the deposits of this organization,” DiNello said. “I mean, does anybody think that they could be higher today than at the end of the year, given what we’ve been going through here? I mean, come on.”
NYCB has seen “virtually no deposit outflow” from retail branches, he said.
— CNBC’s Ritika Shah contributed to this report.
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Moody’s downgrades NY Community Bancorp to junk, shares plunge
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Hosted by Brian Sullivan, “Last Call” is a fast-paced, entertaining business show that explores the intersection of money, culture and policy. Tune in Monday through Friday at 7 p.m. ET on CNBC.
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NY Community Bancorp plunge: What it means for regional banking sector at large
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Liz Hoffman, Semafor business and finance editor, joins ‘Squawk Box’ to discuss turmoil facing New York Community Bancorp, what it means for the regional banking sector at large, and more.
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NYCB ‘didn’t have its act together’, says Christopher Whalen after stock plunged 43% this week
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Hosted by Brian Sullivan, “Last Call” is a fast-paced, entertaining business show that explores the intersection of money, culture and policy. Tune in Monday through Friday at 7 p.m. ET on CNBC.
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Japanese bank tanks over 20% after flagging losses tied to U.S. commercial property
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A pedestrian walks past a sign for Aozora Bank Ltd. at the company’s headquarters in Tokyo, Japan, on Friday, May 14, 2010. Shinsei Bank Ltd., the lender partly owned by U.S. investor J. Christopher Flowers, and Aozora Bank Ltd. said they canceled a planned merger that would have created Japan’s sixth-largest bank by assets. Photographer: Tomohiro Ohsumi/Bloomberg via Getty Images
Bloomberg | Bloomberg | Getty Images
Shares of Aozora Bank tumbled to their lowest level in eight months Thursday after the Japanese bank warned of a fiscal-year net loss due to its exposure to U.S. office loans.
The Tokyo-based commercial lender said it now expects to post a net loss of 28 billion Japanese yen ($191 million) for the fiscal year ending Mar. 31, a swing from its previous forecast for a net profit of 24 billion yen.
Aozora shares sank by as much as 21.5% to 2,557 yen (about $17.41), its lowest closing level since May 31. In comparison, Japan’s Nikkei 225 benchmark closed down 0.8% Thursday.
Aozora Bank shares
“Due to higher U.S. interest rates and a shift to remote work accelerated by COVID-19, the U.S. office market continues to face adverse conditions combined with extremely low liquidity,” the bank said in a statement on Thursday.
“While price discovery is anticipated to eventually improve with a gradual increase in office transactions on the back of an expected return-to-office movement as well as a pause in the rise in U.S. interest rates, our view is that it may take another year or two for the market to stabilize,” the bank added.
Aozora’s announcement came shortly after U.S. regional bank New York Community Bancorp announced a surprise net loss of $252 million for the fourth quarter, slashing its dividend and saying it “[built] reserves during the quarter to address weakness in the office sector” — renewing some fears of the strength of U.S. regional banks, which were embroiled in a liquidity crisis last year.
New York Community Bancorp said this was in response to its purchase of the assets of Signature Bank, one of the regional banks that collapsed in last year’s crisis. That purchase raised their total assets to $100 billion, placing them in a category that subjects the bank to more stringent liquidity standards.
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Lending issues are ‘slow but there’ and starting to ‘ripen’, says Raging Capital’s Bill Martin
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Bill Martin, Raging Capital, joins ‘Fast Money’ to talk New York Community Bancorp’s disaster quarter and stock reaction.
06:12
Wed, Jan 31 20246:03 PM EST
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Stocks making the biggest moves premarket: Intel, Roku, Procter & Gamble and more
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Signage outside Intel headquarters in Santa Clara, California, on Monday, Jan. 30, 2023.
David Paul Morris | Bloomberg | Getty Images
Check out the companies making headlines before the bell.
Intel — Shares popped 6.7% after the chipmaker posted better-than-expected second-quarter results and a return to profitability after two consecutive losing periods. Intel’s forecast for the third quarter also came in above analyst expectations. The company reported adjusted earnings of 13 cents a share on revenues of $12.95 billion.
Roku — The streaming stock rallied nearly 10% after reporting a narrower-than-expected loss for the second quarter. Roku reported a loss of 76 cents a share and revenues of $847 million. Analysts polled by Refinitiv had anticipated a loss of $1.26 per share and $775 million in revenue.
Biogen — Biogen shares moved slightly lower after the biotechnology company said it’s acquiring Reata Pharmaceuticals for $172.50 per share, in a cash deal valued at about $7.3 billion. Shares of Reata soared more than 51% on the news.
Procter & Gamble — The consumer giant saw shares rise more than 1% in premarket trading after the company reported quarterly earnings and revenue that beat analysts’ expectations. However, P&G released a gloomy outlook for its fiscal 2024 sales that fell short of Wall Street’s estimates.
Exxon Mobil — Shares moved slightly lower after the oil stock posted mixed second-quarter results. The company reported earnings of $1.94 a share, excluding items, that fell short of the $2.01 expected by analysts, per Refinitiv. Revenues came in at $82.91 billion, above the expected $80.19 billion.
Chevron — The oil stock lost nearly 1% even after reporting a beat on the top and bottom lines for the second quarter. Earnings fell from a year ago due to a drop in oil prices.
First Solar – Shares soared 12% after the solar company posted earnings per share of $1.59 on revenue of $811 million for the second quarter. Those results beat Wall Street expectations of 96 cents per share on revenue of $721 million, according to Refinitiv. The company also announced plans to invest up to $1.1 billion to build a fifth manufacturing facility in the United States.
Enphase Energy – Shares of Enphase dropped more than 15% after the company posted second-quarter revenue Thursday of $711 million that fell short of analyst estimates of $722 million, according to Refinitiv. The stock also faced a wave of downgrades Friday morning from Deutsche Bank, Wells Fargo and Roth MKM.
Sweetgreen – Shares of the salad chain slid more than 13% after the company posted weak sales that missed Wall Street expectations in the second quarter and a net loss of $27.3 million, or 24 cents per share. Sweetgreen did say it’s aiming to turn a profit for the first time by 2024.
Ford Motor – The automaker said adoption of electric vehicles is going more slowly than the company forecast and that it expects to lose $4.5 billion on the EV business this year, widening losses from roughly $3 billion a year earlier. Otherwise, Ford posted strong quarterly earnings that beat Wall Street expectations and raised its full-year guidance. Shares were flat in premarket trading.
Juniper Networks — Shares of the technology company fell 8% after Juniper’s third-quarter guidance came in lighter than expected. The company said it expects earnings per share between 49 cents and 59 cents, with revenue between $1.34 billion and $1.44 billion. Analysts had penciled in 62 cents per share and $1.48 billion of revenue. The company’s second-quarter results did come in slightly above expectations.
AstraZeneca — U.S. listed shares of the drugmaker added more than 5% before the bell. The U.K.-based company reported second-quarter earnings of $2.15 per share on $11.42 billion in revenue. That surpassed the EPS of $1.95 expected by analysts polled by Refinitiv on revenues of $11.03 billion. AstraZeneca also said it would buy a portfolio of preclinical rare disease gene therapies from Pfizer for up to $1 billion.
Xpeng — The Chinese electric vehicle stock jumped more than 6% in the premarket. Jefferies upgraded shares to a buy from a hold, citing Xpeng’s joint development plan with Volkswagen
New York Community Bancorp — The regional bank stock rose about 2% before the bell after JPMorgan upgraded New York Community Bancorp to an overweight rating from neutral. The Wall Street firm called the company a “massive market share taker” in its upgrade.
Mondelez International — Mondelez International added 2.7% before the bell on strong second-quarter results. The snack maker on Thursday reported earnings of 76 cents a share, excluding items, on $8.51 billion in revenue. Analysts polled by Refinitiv had estimated EPS of 69 cents and revenues of $8.21 billion.
— CNBC’s Tanaya Macheel, Yun Li and Jesse Pound contributed reporting
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CNBC Daily Open: First Republic Bank is trying to save itself
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General view of First Republic Bank in Century City on March 17, 2023 in Century City, California.
AaronP/Bauer-Griffin | GC Images | Getty Images
This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
UBS’ planned takeover of Credit Suisse calmed the market slightly. Broader market conditions, however, still look unstable.
What you need to know today
- U.S. markets staged a relief rally as all major indexes made minor gains Monday. Asia-Pacific markets rose on Tuesday too. South Korea’s Kospi added 0.42% as the country’s producer price index for February increased 4.8% year on year, a slight decline from the previous month.
- Japan’s Prime Minister Fumio Kishida is on his way to Ukraine for a surprise visit to Ukraine’s President Volodymyr Zelenskyy, Japan’s Ministry of Foreign Affairs confirmed. Kishida’s unexpected trip overlaps with Chinese leader Xi Jinping’s official state visit to Ukraine’s nemesis, Russia and its leader Vladimir Putin.
The bottom line
The “Minsky moment,” named after the economist Hyman Minsky, is a sudden collapse of the market after a long period of aggressive speculation brought on by easy money. Markets might face a Minsky moment soon, warned Marko Kolanovic, JPMorgan Chase’s chief market strategist and co-head of global research.
Markets haven’t collapsed. Some bank stocks are in the doldrums, yes, but the SPDR S&P Regional Banking ETF, a fund of regional bank stocks, rose 1.11% on Monday. Major indexes were up yesterday too. The Dow Jones Industrial Average gained 1.2%, the S&P 500 added 0.89% and the Nasdaq Composite increased 0.39%.
But there are signs market instability is increasing. The banking crisis is causing regional banks — which account for around a third of all lending in the United States — to reduce their loans, said Eric Diton, president and managing director of The Wealth Alliance. In other words, the availability of money in the economy is slowing even without the Federal Reserve increasing interest rates.
Speaking of interest rates, analysts seem to think there’s no good path forward for the Fed. An interest rate hike “would be a mistake,” MKM Partners Chief Economist Michael Darda told CNBC. On the other hand, a pause would cause “panicked reactions by equity and bond investors,” according to Nationwide’s Mark Hackett. This suggests markets are already so jittery that whatever the Fed does — even if it’s nothing — it might cause instability to spread.
With that in mind, investors might want to heed Kolanovic’s warning that a Minsky moment could be on the horizon.
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