A troubled New York bank with $113.9 billion in assets has just revealed that its balance sheet is far worse than investors already knew.
New York Community Bank (NYCB) initially triggered fears of a wider banking crisis when Moody’s downgraded its credit rating last month due to “multi-faceted financial, risk-management and governance challenges.”
Now, in a series of regulatory filings, the bank has revealed that its losses in the fourth quarter of last year were $2.4 billion worse than previously reported, acknowledging “material weakness” in its risk management operation.
“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 news triggered a 25% drop in the bank’s stock – which had already fallen more than 50% in the last two months.
The bank’s struggles have renewed concern that the industry at large is in a precarious position due to the Federal Reserve’s sustained rise in interest rates.
The New York Times describes the bank as “teetering” due to its exposure to the troubled commercial real estate market and its acquisition of a significant portion of Signature Bank, which collapsed in March of last year.
“The ugly developments were the last thing NYCB needed after weeks of trying to assuage investors’ concerns about its financial health. For weeks, questions have swirled about the depth of its losses in investments and loans tied to both office and apartment buildings — an area of concern for banks in general, but one in which NYCB has particular concentration.”
The bank’s now former CEO, Thomas Cangemi, has resigned.
Incoming CEO Alessandro DiNello says the lender is confident that things are now moving in the right direction amid changes in upper management.
“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.”
NYCB is based in Long Island and expanded nationwide when it acquired
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