New York Community Bancorp (NYSE:NYCB) finds itself in the eye of the storm once again.
On Thursday, the bank publicly acknowledged a "material weakness" in its internal controls concerning loan review processes. This admission was accompanied by a major leadership change at the top, highlighting a period of upheaval for the company.
The bank cited "ineffective oversight, risk assessment, and monitoring activities" as the root of the issues and promised to outline a remediation plan in its forthcoming annual report to the U.S. Securities and Exchange Commission within the next 15 days.
Thomas R. Cangemi, the former CEO, stepped down immediately after 27 years at the helm of the bank but will continue to serve on the board. The bank has appointed Alessandro DiNello as the new President and CEO and Marshall Lux as the Presiding Director of the Board.
Following these announcements, New York Community's shares plummeted by over 20% shortly after the market opened on Friday. The move dragged down the broader regional bank industry, with the SPDRRegional Banking ETF (NYSE:KRE) down over 3%.
Among the holdings in the KRE ETF, the table below shows the worst-performing regional bank stocks, excluding NYCB, at 10:00 a.m. ET on Friday.
Name
1-DayChg %
Metropolitan Bank Holding Corp. (NASDAQ:MCB)
-5.02%
Flushing Financial Corporation (NASDAQ:FFIC)
-4.28%
Dime Community BancsharesInc. (NASDAQ:DCOM)
-4.27%
First Foundation Inc. (NYSE:FFWM)
-4.16%
Valley National Bancorp (NASDAQ:VLY)
-4.15%
Axos Financial, Inc. (NYSE:AX)
-3.86%
M&T Bank Corporation (NYSE:MTB)
-3.63%
Pinnacle Financial Partners, Inc. (NASDAQ:PNFP)
-3.60%
Columbia Banking System, Inc. (NASDAQ:COLB)
-3.54%
Western Alliance Bancorporation (NYSE:WAL)
-3.43%
NYCB Tumbles: Analyst Reactions
"Uncertainty is the enemy of bank stock investing. And, without a doubt, the situation feels a bit uncertain at NYCB right now," Piper Sandler analyst Mark Fitzgibbon, said. The analyst described the control weaknesses as the "most worrisome" issue, leading him to downgrade the stock from Overweight to Neutral. Piper Sandler expressed concern over potential further issues under the new leadership.
JPMorgan maintained a Neutral rating on the stock, citing a risk profile that remains outside a "comfort zone."
David J. Chiaverini, CFA from Wedbush, highlighted that the internal control review might necessitate additional reserves, especially for the company's exposure to NYC's rent-regulated multifamily sector. Consequently, Wedbush lowered its core EPS estimates for 2024/2025 from 80 cents/90 cent to 55 cents/65 cents and reduced the price target from $5 to $3.50.
NYCB Tumbles: Regional Bank Movers
The issues at NYCB have raised broader concerns about the banking sector's exposure to real estate loans, particularly to the office-related sector.
According to a recent Goldman Sachs analysis, NYCB's commercial real estate loans make up 56% of its total loan portfolio, significantly higher than the 18% average for the regional banks under their coverage.
Other banks with a substantial commercial real estate exposure – above 20% of total loans – include First Hawaiian Inc. (NASDAQ:FHB), Synovus Financial Corp. (NYSE:SNV), United Bankshares Inc. (NASDAQ:UBSI), First Horizon Corporation (NYSE:FHN), and Citizens Financial Group, Inc. (NYSE:CFG).
Read now: Banking Giants Confront Rising Delinquencies In Commercial Real Estate Sector
WedbushのCFAであるDavid J. Chiaverini氏は、内部統制のレビューが同社のNYCの家賃規制賃貸マルチファミリーセクターにおける露出に特に必要である可能性があることを強調しました。このため、Wedbushは、2024/2025年のコアEPS見通しを80セント/90セントから55セント/65セントに引き下げ、株価目標も5ドルから3.50ドルに下げました。
