(Bloomberg) — New York Community Bancorp’s credit grade was cut to junk by Fitch Ratings, and Moody’s Investors Service lowered its rating even further, a day after the commercial real estate lender said it discovered “material weaknesses” in how it tracks loan risks.
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Fitch downgraded the bank’s long-term issuer default rating to BB+, one level below investment grade, from BBB-, according to a statement Friday. Moody’s, which cut the bank to junk last month, lowered its issuer rating to B3 from Ba2.
The bank’s discovery of weaknesses “prompted a reconsideration of NYCB’s controls around adequacy of provisioning, particularly with respect to its concentrated exposure to commercial real estate,” Fitch said.
Read More: NYCB Flags Weaknesses in Loan Oversight and Names New CEO
The bank’s announcement Thursday that it needs to shore up loan reviews reignited investor concern about the firm’s potential exposure to struggling commercial-property owners, including New York apartment landlords. The stock plunged 26% Friday, even as the company said it doesn’t expect that control weaknesses will result in changes to its allowance for credit losses.
“Moody’s believes that NYCB may have to further increase its provisions for credit losses over the next two years because of credit risk on its office loans,” the credit rater said in a statement. It also pointed to “substantial repricing risk on its multifamily loans.”
NYCB’s stock ended the week at $3.55, bringing its decline this year to 65%.
“The company has strong liquidity and a solid deposit base,” Chief Executive Officer Alessandro DiNello, who took over this week, said in a statement earlier Friday. “I am confident we will execute on our turnaround plan to deliver increased shareholder value.”
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