The New York Community Bank stock price fell nearly 49% for 2 consecutive trading days, and the stock price has fallen 73.78% so far this year. Fitch and Moody's downgraded their ratings one after another. Some analysts pointed out that a reduction in credit ratings would increase the company's capital costs, leading to a further deterioration in the company's finances.
NYCB's credit rating was downgraded to “junk”, and the stock price fell nearly 49% for 2 consecutive trading days.
Overnight on March 4, the New York Community Bank (NYCB) stock price fell more than 23% on Monday, hitting a new low since 1996, after plummeting 26% last Friday. The cumulative decline so far this year has reached 73.78%.
Some analysts pointed out that since the bank revealed last Friday that the bank had major problems in monitoring and managing loan risks and negative news such as changing the CEO, it raised investors' concerns that NYCB's financial situation might deteriorate further, causing the stock price to plummet.
Furthermore, credit rating downgrades and analysts' negative ratings of stocks added another fuel to the bank's decline. Two rating agencies downgraded the NYCB rating one after another, with Fitch Ratings downgraded it to a “junk grade.” In February of this year, Moody's downgraded NYCB's credit rating to junk. On Friday, Moody's further downgraded the long-term deposit rating of Flagstar Bank, a major bank under NYCB, from Baa2 to Ba3.
Meanwhile, Wedbush Securities Inc. analyst David Chiaverini also believes that the company's stock return will fall short of the market average. He pointed out that a reduction in the credit rating will increase the company's capital cost and put financial pressure on the company, because a lower credit rating usually means an increase in the company's borrowing costs, and investors will demand higher interest rates to cover the increased risk.
Although NYCB performed well compared to other regional banks in early 2023, its stock price began to fall since the January earnings report was released, and has fallen by two-thirds so far this year. Financial reports show that the bank has drastically cut dividends and increased loan loss reserves, which indicates that there may be more loans that cannot be recovered in the future. This is generally seen as a sign of deteriorating bank performance, further affecting stock prices.
Despite the fall in NYCB's stock price, overall bank stocks performed well. The KBW Bank Index rose the most 2.8% on Monday, and the regional banking index, which includes the NYCB, rose 0.8%.