NYCB investors await new CEO’S vision
Firm likely to post loss in 1Q, credit questions linger
“The nice thing about having a new management team is you can distance yourself from the old management team. You can say, ‘We inherited this, and this is our plan.’” Christopher Mcgratty
NEW YORK: New York Community Bancorp Inc (NYCB) has had one of the most tumultuous quarters in recent banking history. Its first-quarter earnings will probably reveal more about impacts from the drama – and management’s plan to move forward.
Over the past three months, the Hicksville, New York-based lender has replaced its chief executive officer twice, been hit by credit downgrades and ultimately landed a massive capital infusion that brought with it new investors and board members.
When NYCB reports earnings, expected this week, analysts will be eager to know how the bank’s new leaders can mend the credit concerns and lapses that have hobbled the firm, and ultimately shape it into an institution more like its regional-banking peers.
“The nice thing about having a new management team is you can distance yourself from the old management team,” Keefe, Bruyette & Woods analyst Christopher Mcgratty said in an interview. “You can say, ‘We inherited this, and this is our plan.’”
The company shocked investors with its fourth-quarter earnings report in January, when it slashed its dividend and set aside provisions to cover loan losses that were more than 10 times what analysts had expected. The results ignited fear over the state of NYCB’S commercial real estate loans and sent shares tumbling a record 38% in one day.
NYCB, which snagged parts of Signature Bank last year after the regional lender failed, was grappling with credit deterioration in its portfolio of loans backed by rent-regulated New York City apartments and Manhattan office buildings.
In the weeks that followed, credit-ratings cuts and disclosures of material weaknesses in internal loan-review controls further hammered the bank’s shares.
In early March, a cohort of investors helmed by former treasury secretary Steven Mnuchin’s Liberty Strategic Capital interceded, injecting more than Us$1bil into the beleaguered lender.
Joseph Otting, a former comptroller of the currency who had previously teamed up with Mnuchin at Onewest during that bank’s turnaround, was installed as NYCB’S chief executive officer, replacing Alessandro Dinello – who had himself replaced Thomas Cangemi only days earlier.
With several of the investors taking seats on NYCB’S board and new management now at the helm – including a chief financial officer, head of commercial real estate lending and general counsel named just two weeks ago – the version of NYCB investors will see when the bank reports earnings will be quite different than what they saw three months ago.
Analysts are expecting the company to post a loss for the first quarter, according to the average of estimates compiled by Bloomberg. NYCB has yet to say when it’s reporting first-quarter results.
The focus of company commentary is expected to be on its credit portfolio and Otting’s vision for moving the company forward.
The plan should be straightforward and lay out specific targets and rough timelines, and include a focus on diversification but not necessarily an increase in size, Piper Sandler Cos analyst Mark Fitzgibbon said in a note to clients.
Reducing the bank’s commercial real estate concentration may take a circuitous route, Citigroup Inc analyst Ben Gerlinger said in an interview. Given the discount such loans would trade at due to high interest rates, it would likely make more sense for the bank to offload other loans in the current environment.