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NYCB’s Turmoil and Wall Street Concerns

Real-estate lender New York Community Bancorp (NYCB) has rattled investors with a series of unsettling announcements, intensifying nerves on Wall Street.

Leadership Changes and Internal Control Weaknesses

The Long Island-based bank disclosed multiple developments on Thursday, exacerbating concerns that had surfaced since it reported an unexpected net loss on January 31. Among these announcements was the appointment of Alessandro DiNello as the new CEO, succeeding Thomas Cangemi immediately.

Adding to the unease, NYCB revealed in regulatory filings that it had identified “material weaknesses” in its internal controls related to internal loan review. The bank attributed these issues to deficiencies in oversight, risk assessment, and monitoring activities.

Financial Setbacks and Stock Plunge

In a further blow, NYCB disclosed a retroactive $2.4 billion goodwill impairment charge for the fourth quarter and announced a delay in filing its 2023 annual report due to ongoing assessments of its internal controls.

The succession of disclosures triggered a 20% decline in NYCB shares during after-hours trading. Year-to-date, the stock has plummeted by 53%, marking a stark contrast to its previous performance.

Impact on the Real-Estate Sector

NYCB’s troubles have raised significant concerns, given its stature as the parent company of Flagstar Bank, a major regional lender, and the second-largest lender to the multifamily property sector in the US. Analysts fear that the bank’s issues could spill over into the real-estate sectors it serves, particularly as the commercial property market contends with challenges such as remote work and rising borrowing costs.

Uncertain Future and Investor Reaction

Mark Fitzgibbon, an analyst at Piper Sandler, likened NYCB’s situation to a game of whack-a-mole, expressing concerns about potential additional issues emerging under new leadership. Following these developments, Fitzgibbon downgraded NYCB’s stock from overweight to neutral.

NYCB shares plunged by 21.7% to $3.75 apiece during after-hours trading, erasing gains made earlier in the day. The market’s reaction underscores the uncertainty surrounding the bank’s future amid ongoing challenges and leadership transitions.

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