NYCB shares plummet as internal control issues hurt investor trust

By Manya Saini

(Reuters) -New York Community Bancorp shares extended their slide days after the lender replaced its CEO and flagged "material weaknesses" in internal controls related to a loan review.

The shares tumbled over 23% to close at their lowest since 1996. They had dropped as much as 26% on Friday despite the bank saying that potential issues related to its financial reporting would not impact its 2023 results.

"Unfortunately, these additional news items place further scrutiny on the company at a time when it needs to restore confidence," analysts at Morningstar DBRS said in a note.

NYCB has been under pressure since it posted a surprise fourth-quarter loss on Jan. 31 due to higher provisions tied to its exposure to the beleaguered commercial real estate (CRE) sector, and cut its dividend.

Last week, it revised its quarterly loss to $2.7 billion, citing a $2.4 billion goodwill impairment tied to transactions from 2007 and before, and the bank named financial services veteran George Buchanan as its chief risk officer.

"The return to the news cycle will once again test customer loyalty and deposit stickiness given this new round of stock price pressure following the fallout from a disappointing 4Q23," the ratings agency said.

The lender is also subject to stricter capital and liquidity norms as its balance sheet now exceeds the $100 billion regulatory threshold due to the acquisition of Flagstar and purchase of some assets of failed Signature Bank.

Shares in the bank have slumped over 73% so far this year as worries related to its CRE exposure spilled over globally.

The KBW Regional Banking Index - a key gauge of investor sentiment towards the sector - was down nearly 12% in the same period.

Short-sellers targeting a key regional U.S. bank exchange-traded fund have made $977 million on paper so far this year, while NYCB's plunge has fetched them $145 million, data from analytics firm Ortex showed.

(Reporting by Manya Saini, Niket Nishant, Jaiveer Shekhawat in Bengaluru; Nupur Anand in New York; Editing by Sriraj Kalluvila, Arun Koyyur and Richard Chang)