New York Community Bancorp stock slides amid warnings over ‘governance risk’

(Reuters) — New York Community Bancorp shares fell 9.5% before the bell on Wednesday, bracing for another challenging trading session after analysts expressed caution about “governance risks” at the bank.

Investors have fled the stock since the lender last week reported a surprise quarterly loss and recorded huge provisions for potential bad loans tied to the commercial real estate (CRE) segment, sending shockwaves through the industry.

NYCB said on Tuesday it was looking for candidates to fill up the chief risk officer (CRO) and chief audit executive positions after Bloomberg first reported about the departures a day earlier.

It currently has “qualified personnel” holding those roles on an interim basis, the bank said.

J.P. Morgan, which had maintained its “overweight” rating despite the turbulence following the bank’s earnings report last week, said it was “surprised that the news of these departures, particularly for the CRO role did not come from NYCB directly.”

“NYCB’s choice not to disclose the departures of key executives in times of stress will heighten investor concerns,” the brokerage wrote in a note.

The brokerage downgraded the stock to “neutral” and slashed its price target to $5.5 from $11.5. The stock, which has plumbed lows not seen since 1997, last traded at $3.78 before the bell, 31% lower than J.P. Morgan’s new target.

At least 14 brokerages have cut their price targets or their ratings on the stock.

FILE PHOTO: A screen displays the trading information for New York Community Bancorp on the the NYSE in New York

On Tuesday, Moody’s cut the bank’s credit rating to junk and warned of further downgrades.

“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 lines of defense, the risk and audit functions of the bank, at a pivotal time,” the agency said.

NYCB CEO Thomas Cangemi said Moody’s downgrade was not expected to have a material impact on its contractual arrangements.

The bank sought to reassure investors with some details of its financial strength. Total deposits of $83 billion were up from $81.4 billion at the end of 2023, the bank said.

Total liquidity of $37.3 billion also exceeds uninsured deposits, NYCB said.

(Reporting by Niket Nishant in Bengaluru; Editing by Sriraj Kalluvila)