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Investors Business Daily
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HARRISON MILLER

Regional Bank Stocks, New York Community Bank Fall After New Chairman, Moody's Junk Rating

Embattled New York Community Bancorp continued falling early Wednesday after appointing a new executive chairman and issuing a financial update late Tuesday. Shares dove prior to the announcement as Moody's Investor Service late Tuesday slashed NYCB's credit rating by two rungs to junk. Regional bank fell in early trade after a slight premarket gain following NYCB's announcement.

New York Community Bancorp appointed Alessandro DiNello as executive chairman early Wednesday, effective immediately. DiNello will work with New York Community Bank's senior executives "to improve all aspects of the bank's operations," NYCB said in the announcement. The former Flagstar Bank president and CEO, DiNello has served as the nonexecutive chairman of New York Community Bancorp's board following the December 2022 acquisition of Flagstar.

Moody's Downgrade

Moody's Investor Service cut New York Community Bancorp's credit rating to junk territory late Tuesday, to Ba2 from Baa3, citing "financial, risk-management and governance challenges."

"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 line of defenses, 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."

Fitch Ratings on Friday downgraded NYCB stock to the lowest investment-grade rating, the Wall Street Journal reported.

Liquidity And Deposit Update

The Hicksville, N.Y.-based bank also provided a liquidity update late Tuesday, following its Q4 earnings miss last week.

Total deposits sat at $83 billion, up from $81.4 billion at year-end. Total insured and collateralized deposits represent 72% of the total. New York Community Bancorp reported total liquidity of $37.3 billion, exceeding its uninsured deposits with a coverage ratio of 163%.

"We took decisive actions to fortify our balance sheet and strengthen our risk management process during the fourth quarter," CEO Thomas Cangemi said in the announcement. "Despite the Moody's ratings downgrade, our deposit ratings from Moody's Fitch and DBRS remain investment grade. The Moody's downgrade is not expected to have a material impact on our contractual arrangements."

Cangemi said the bank is also looking to bring in a new chief risk officer and chief audit executive.

New York Community Bancorp last Wednesday reported a loss of 27 cents per share, missing expectations of a 29-cent per share gain. The bank's loan loss provisions soared to $552 million from $62 million the prior quarter, due to office-sector weakness and risk in its multifamily portfolio.

New York Community Bancorp also slashed its dividend by 70% to 5 cents per share.

NYCB Stock And Bank Action

NYCB stock fell another 7.6% early Wednesday, after swinging from more than a 10% loss to an 8% gain in volatile premarket trade. Shares dived more than 22% Tuesday after falling 10.6% Monday, dropping to its lowest level since May 1997, according to MarketSmith.

The SPDR S&P Regional Banking ETF retreated 2.6% early Wednesday after rising slightly premarket. KRE is trading more than more than 5% lower for the week and down nearly 8% in February.

Bank of America eased 1%, trading below a 35.10 buy point for a cup-with-handle base. Wells Fargo slid 1.3% and is below a 50.77 entry for a six-week flat base. JPMorgan ticked lower Wednesday. Shares are extended following a mid-December cup breakout.

You can follow Harrison Miller for more stock news and updates on X/Twitter @IBD_Harrison

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