On February 8, 2024, a New York community bank stood in Brooklyn, New York City.
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New York Community Bank Wednesday release The bank posted a quarterly loss of $335 million due to a rise in bad business loans and higher expenses, but its shares soared on new performance targets.
The first-quarter loss was equivalent to 45 cents per share, compared with net profit of $2 billion, or $2.87 per share, in the same period last year. After adjusting for charges including merger-related items, the loss was $182 million, or 25 cents per share, above LSEG’s estimate of a loss of 15 cents per share.
“Since taking on the role of CEO, my focus has been to transform New York Community Bank into a high-performing, diversified regional bank,” CEO Joseph Otting Zhongshuo release. “While this will be a transition year for the company, we have a clear path to profitability over the next two years.”
Otting said the bank will have higher profitability and capital levels by the end of 2026. These include a return on average earnings assets of 1% and a target common equity Tier 1 capital level of 11% to 12%.
The bank’s shares rose 33% in early trading.
Otting took over the troubled regional bank in early April. investor groups Led by former Finance Minister Steven Mnuchin Injecting more than $1 billion into lenders. NYCB’s troubles began in late January, with a disastrous fourth-quarter earnings report and levels of loan loss provisions that shocked analysts. The bank’s stock price plummeted amid multiple management changes and rating agency downgrades.
Otting told analysts on a conference call that NYCB had “identified an opportunity to sell $5 billion in assets” to improve the company’s liquidity levels. He added that the deal could be completed within 60 to 70 days and could be announced soon.
The bank set aside $315 million for credit losses this quarter, compared with $170 million a year earlier, and said it expected reserve ratios to rise for the remainder of 2024.
Nonperforming loans increased $370 million from the fourth quarter of 2023 to $798 million as high interest rates took a toll on commercial real estate borrowers.
In preparing for future expected loan losses, NYCB assumes a 42% decline in office tower values and a roughly 30% decline in multifamily building values, executives said on an analyst call.
“The office market is under great pressure,” Otting said. “Due to several tight office loans, investors chose to come to us and we had to take over the property.”
Over time, Otting said, the bank will seek to reduce risk on its office and multifamily loans by managing customer relationships and shedding those who do not retain deposits with NYCB.
The results and targets are a relief to analysts who were concerned that NYCB might miss the window to report results. The bank did not release Wednesday’s earnings until late Tuesday.
“Overall, we see better-than-expected outcomes at ‘reasonable’ reserve build volumes,” analysts led by Jefferies’ Ken Usdin wrote in a note. Fear of the worst.”
