Shares of New York Community Bancorp plummeted over 26% on Friday following the announcement of a leadership shakeup and revelations regarding internal control issues.
Alessandro DiNello, the bank's executive chairman, has taken on the roles of president and CEO amid concerns about the bank's exposure to commercial real estate. The sudden changes come after Moody's Investors Service downgraded NYCB's credit rating to junk status earlier this month, indicating ongoing challenges for the regional lender.
In addition to the leadership changes, NYCB disclosed material weaknesses in its internal controls related to internal loan review, citing ineffective oversight, risk assessment, and monitoring activities. This disclosure has raised further concerns about the bank's risk management practices and operational stability.
"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 released a statement on Thursday.
The market's response was prompt, with NYCB's stock plunging over 30% at the opening bell and now down 65% for the year. The sudden departure of longtime CEO Thomas Cangemi, who reassured investors about the bank's viability, further fueled investor unease. Alessandro DiNello, who previously served as president and CEO of Flagstar Bank, will now lead NYCB through these turbulent times.
The bank also announced a $2.4 billion goodwill impairment charge and acknowledged its inability to file its annual report with the U.S. Securities and Exchange Commission on time. While NYCB anticipates filing within the 15-day grace period, the delay underscores the seriousness of the internal control issues and the complexity of remediation efforts.
Analysts are closely monitoring the situation, with concerns about the bank's ability to address the material weaknesses and restore investor confidence. The disclosure of these weaknesses is seen as a crucial step towards implementing necessary changes in credit risk monitoring and reporting practices.
"The disclosure of a material weakness in its loan review process is important, and significant changes will need to be made with respect to how they monitor credit risk going forward which we expect may lead to them being more proactive on recognizing issues going forward," Citi's Keith Horowitz stated in a client note.
Despite assurances from industry analysts that the issues at NYCB are unique and not indicative of broader systemic risks, investors remain cautious. The bank's transformation into a larger institution following the acquisition of Signature Bank's assets in 2023 has sought increased regulatory scrutiny and operational challenges.
