Shares of New York Community Bancorp (NYSE:NYCB) were tumbling more than 10% to below the $4 mark in Wednesday morning trading, hitting their lowest level since March 1997. The stock was halted on a circuit breaker to the downside before resuming trading.
This steep decline comes amid ongoing concerns about the bank’s exposure to troubled commercial real estate loans.
On Tuesday, two U.S. investment banks issued mixed reports on NYCB:
Bank of America downgraded the stock from Overweight to Neutral and lowered the price target from $8.50 to $5.
JPMorgan downgraded NYCB from Overweight to Neutral and lowered the price target from $11.50 to $5.50.
Piper Sandler reiterated its Overweight rating, maintaining its $8 price target.
NYCB released an overnight statement stating that its deposits have risen and its liquidity is “ample.” The bank said that total insured and collateralized deposits represent 72% of total deposits.
A cold shower came from ratings agencies that downgraded NYCB’s credit rating:
Fitch downgrade NYCB’s long-term credit rating to one notch above non-investment grade at BBB-.
Moody’s downgraded NYCB’s debt rating from Baa3 to Ba2.
The SPDR S&P Regional Banking ETF (NYSE:KRE) was 1.6% lower at 10:30 a.m. in New York, on track for six negative sessions out of the last seven.
Chart: NYCB Tumbles To March 1997 Levels
Bank of America Drops Bull Stance On NYCB
Bank of America downgraded NYCB from Overweight to Neutral and lowered the price target, stating the persistent sell-off in NYCB’s stock, driven by perceived risks associated with its commercial real estate portfolio and increased regulatory scrutiny, “is likely to weigh on the EPS outlook and on investor sentiment to add exposure to the stock.”
Despite the bank’s sufficient liquidity to weather the storm, the negative publicity could adversely affect customer behavior and lead to an unexpected rise in deposit costs, said analyst Ebrahim Poonawala.
Even with a 50% drop in non-interest-bearing deposits, the bank could stay profitable, though this scenario poses significant risks to earnings per share forecasts, he said.
JPMorgan Is ‘Out Of Comfort Zone’ On NYCB
JPMorgan’s latest note on NYCB highlighted the challenges ahead, particularly from ratings agency downgrades impacting its…
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