New York Community Bank shares plummet after $2.4bn earnings hit
New York Community Bancorp (NYCB) came under fresh pressure on Wall Street after reporting “material weaknesses” in its internal controls, booking a $2.4bn hit to earnings and replacing its chief executive.
Shares in the bank tumbled 19% in after-hours trading on Thursday, extending its extraordinary rout on the stock market.
NYCB first set off alarm bells in January by revealing a surprise quarterly loss and cutting its dividend for shareholders. The subsequent sharp decline of its stock, which is down some 54% so far this year, heightened unease about the US’s regional banking sector.
NYCB’s struggles have come less than a year after the collapse of Silicon Valley Bank (SVB) unleashed a regional banking crisis that roiled the industry. Last May First Republic became the largest US lender to fail since 2008.
The bank grew significantly last year. Its assets swelled beyond $100bn after its purchase of the assets of Signature Bank, which failed in the aftermath of SVB’s collapse in the spring.
On Thursday, NYCB announced a $2.4bn impairment charge for the fourth quarter, linked to historical transactions. The charge has “no impact” on regulatory capital ratios or any outstanding credit agreements,
NYCB stressed.
An assessment of NYCB’s internal controls led the bank’s management to identify “material weaknesses … related to internal loan review, resulting from ineffective oversight, risk assessment and monitoring activities,” the bank said.
The disclosure was made in a regulatory filing, alongside a press release that announced Thomas Cangemi, its president and chief executive, had stepped down with immediate effect.
Cangemi is succeeded by Alessandro DiNello, who became executive chairman at NYCB in February.
“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,” said DiNello. “The changes we’re making to our Board and leadership team are reflective of a new chapter that is underway.”
Based in Hicksville, New York, NYCB finished last year with deposits of $81.4bn. The lender has 420 branches.