The rating agency Fitch Ratings has decided to downgrade the rating of New York Community Bancorp (NYCB.US) to 'junk' status, with a negative outlook. Last week, Moody's also downgraded the rating, a day after the bank, which is struggling with commercial real estate (CRE) problems, reported that it had identified "significant weaknesses" in its previously conducted credit risk analysis.
- Fitch downgraded the bank's long-term issuer rating to BB+, i.e., to a level below investment grade (compared to BBB- previously). Moody's, at the end of February, downgraded the rating to B3 from Ba2.
- Fitch stated that the weaknesses, which the bank informed about, prompted analysts to reconsider the problems in terms of the level and adequacy of reserves, especially with reference to concentrated exposure to commercial real estate.
- Moody's, on the other hand, indicated that NYCB may be forced to further increase credit loss reserves over the next two years due to credit risk associated with office loans. The bank also highlighted significant risk of overestimation of so-called multifamily loans, which, alongside CRE, are another risk factor.
On Friday, NYCB's shares fell by over 25%, although the institution conveyed that it does not expect the problems related to risk control to lead to further write-offs for credit losses. The current (new) CEO of the bank, Alessandro DiNello, emphasizes that the bank still has considerable liquidity and solid deposits; he also expressed belief that business restructuring will succeed, but Wall Street clearly does not give it a chance. Despite Fitch's decision, the bank's shares are gaining so far in premarket by over 1.3%.
NYCB Shares (D1)
Source: xStation5
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