Its stock has tumbled nearly 57% since it posted a surprise fourth-quarter loss last week due to provisions for loans tied to the CRE industry and cut its dividend to deal with tough regulations.
The share slide has also spilled over to other regional banks, with the KBW Regional Banking Index declining 12% so far this year and 5.4% this month.
NYCB’s newly appointed executive chairman Alessandro DiNello said on Wednesday that if needed the lender would shrink its balance sheet by selling non-core assets to bolster its common equity tier 1 ratio, a key measure of financial strength.
Brokerage Morgan Stanley said it was “modeling a more aggressive balance sheet optimization”, with loans down 10% by the fourth quarter of fiscal 2024 and a more aggressive reserve build in the first half.
‘CHALLENGING OUTLOOK’
Since early 2023, the banking industry has struggling with potential loan losses related to CRE sector that has been reeling with high interest rates and lower office occupancy due to remote work.
Investors fear weak demand for offices could trigger a wave of defaults and pressure banks, which are hoping to avoid selling CRE loans at significant discounts.
DiNello said NYCB will consider the sale of loans in its CRE portfolio or allow them to run off the balance sheet naturally.
Citi analysts said in a note that as the bank looks to build capital, the intermediate outlook is challenging with a 7% ROTCE, or annualized net income for common shareholders, and very low payout.
Source: Economy - investing.com
