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New York Community Bancorp has been downgraded to “junk” status by Moody’s, another blow for the regional US bank whose stock has plummeted over the past week over concerns about potential losses tied to real estate lending.
The downgrade from the rating agency late on Tuesday put further pressure on NYCB’s share price, which fell another 16 per cent in after-hours trading in New York. Its stock is trading at its lowest level in more than 20 years.
NYCB’s stock has plunged more than 50 per cent since last week, when it reported higher losses from real estate loans than investors were anticipating. NYCB could not be immediately reached for comment on the downgrade.
While NYCB is one of many mid-sized banks in the US, its losses have rekindled worries about potential defaults in the real estate market and revived concerns over other regional US lenders, which came under pressure last year following the failure of Silicon Valley Bank.
Moody’s downgraded the overall credit rating for the bank by two notches to Ba1, which is the highest non-investment grade, or junk, rating in its scale. On Friday, Fitch had downgraded it one notch, from BBB to BBB-, leaving it just above non-investment grade.
In a note, Moody’s said NYCB faced numerous “financial, management and risk management” issues. The credit rating group said the bank still lacked sufficient reserves to cover potential loan losses, even after setting aside an additional $500mn in its most recent quarter.
Moody’s said that while NYCB had significantly increased its loss reserves for its office loans to 8 per cent, the reserves it holds against loans to apartment buildings are less than 1 per cent.
“NYCB is highly concentrated in rent-regulated multi-family properties, a segment which has historically performed well for them,” the Moody’s analysts wrote. “However, this cycle may be different.”
Moody’s also cited the fact that it recently lost its chief risk officer as a crucial governance risk. The Financial Times reported earlier this week that NYCB’s chief risk officer Nicholas Munson left the bank just weeks before it announced the unexpected losses.
