New York Community Bancorp tumbled for a second straight day after a pair of rating downgrades threatened to boost the beleaguered bank’s borrowing costs.
Shares of the company fell 23% to close at the lowest level since 1996, after plunging 26% on Friday.
Fitch Ratings cut its assessment to non-investment grade and Moody’s Investors Service, which already had a junk rating on the bank, lowered it even further late Friday. That day’s rout had followed the bank’s disclosure that it replaced its chief executive after finding “material weaknesses” in how it tracks loan risks.
The downgrades “pressure their cost of capital,” Wedbush Securities analyst David Chiaverini, who has an underperform rating on NYCB’s shares, said in an interview.
The stock, which was a relative winner among regional banks in 2023, has lost more than two-thirds of its value so far this year. The slump began after the bank’s earnings report in January, which included a steep cut to the dividend and higher provisions for loan losses.
Moody’s had lowered its credit rating to junk in February. The rating company on Friday also downgraded the long-term deposit rating on NYCB’s lead bank, Flagstar Bank, to Ba3 from Baa2. The rating cut might lead to deposit volatility for the company’s mortgage-escrow business, Bloomberg Intelligence analyst Herman Chan wrote in a note.
NYCB didn’t respond to requests for comment about the impact of the rating cut. In an update last month, the firm had said its liquidity-coverage ratio for uninsured deposits was 163%.
Despite NYCB’s slide, bank stocks more broadly fared well. The KBW Bank Index gained 1.8% Monday, while a regional gauge that includes NYCB slipped 0.6%.
, 2024-03-05 10:48:05
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