New York Community's (NYCB) Ratings Bumped Up by Moody's
New York Community Bancorp’s NYCB credit rating was raised by Moody’s Investors Service — a division of Moody’s Corporation MCO — following the $1.05-billion capital infusion that the bank received last week.
While Moody’s lifted the bank’s long-term issuer rating to B2 from B3, it is still five notches below investment grade. The outlook for the bank’s rating was changed to positive.
The capital raise will help increase NYCB's common equity tier 1 (CET1) capital ratio to 10.2% on a proforma basis, assuming the full conversion of preferred equity to common equity. Per the rating agency, the incremental capital will help the bank absorb credit losses on its commercial real estate portfolio and offer a source of liquidity that has been affected due to a decline in deposits.
Another rationale for the credit rating upgrade was NYCB receiving an unqualified audit opinion on its 2023 ended financial statements.
However, Moody noted, “At the same time, NYCB still faces a number of key decisions in its strategic development and in effectively addressing its fundamental challenges in governance, financial profile, risk management and internal controls.”
In early February, NYCB’s long-term issuer rating was downgraded two notches below investment grade to Ba2. Moody’s said that the company’s ratings could be downgraded further if conditions deteriorate.
The ratings downgrades came less than a week after the regional bank shocked shareholders by posting unexpected commercial real estate loan losses and announcing a 71% cut in its quarterly dividend.
In its 2023 annual filing, the company unveiled that on Feb 29, 2024, it sold the commercial co-operative loan, realizing a gain of $26 million from the prior written-down fair value estimate. In fourth-quarter 2023, NYCB recorded $112 million in net loan charge-offs related to its co-operative loan portfolio.
Additionally, on Mar 13, 2024, New York Community closed the sale of consumer loans, with a net book value of $899 million. Gains on the sale of these loans will be reported in first-quarter 2024.
Over the past six months, NYCB shares have lost 68.4% compared with the industry’s 2.1% decline.
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Currently, NYCB carries a Zacks Rank #5 (Strong Sell).
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Rating Actions of Another Company
Truist Financial’s TFC decision to divest its remaining 80% stake in Truist Insurance Holdings (“TIH”) triggered reactions from two major credit rating agencies — Fitch Ratings and Moody's Investors Service.
Fitch Ratings downgraded TFC's long-term issuer default rating to 'A' from 'A+,' alongside lowering the Viability Rating to 'a' from 'a+.' The rating agency viewed this transaction as a near-term credit positive but acknowledged the constraints that this narrower business mix places on Truist's business and earnings prospects.
Meanwhile, Moody's placed Truist’s long-term ratings on review for a downgrade. The firm cited concerns over TFC's reduced diversification post-sale, increased reliance on net interest income and heightened earnings volatility.
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Moody's Corporation (MCO) : Free Stock Analysis Report
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