New York Community Bank in Brooklyn, New York on February 8, 2024.
Spencer Platt | Getty Images
New York Community Bank on Wednesday published the quarterly loss was $335 million due to a rising tide of bad commercial loans and rising costs, but the lender’s shares rose on the new targets.
The first-quarter loss was 45 cents per share, compared with net income of $2.0 billion, or $2.87 per share a year earlier. Adjusted for expenses including merger-related items, the loss was $182 million, or 25 cents per share, wider than LSEG’s estimate of a loss of 15 cents per share.
“Since taking office as CEO, I have been focused on transforming New York Community Bank into a high-performing, well-diversified regional bank,” the CEO said. Joseph Oetting said in release. “While this year will be a transition year for the company, we have a clear path to profitability over the next two years.”
The bank will have higher profitability and capital levels by the end of 2026, Oetting said. This includes an average earning asset yield of 1% and a Tier 1 common equity target of 11% to 12%.
The bank’s shares jumped 33% in early trading.
Oetting took over the struggling regional bank in early April after a group of investors led by former Treasury Secretary Steven Mnuchin pumped more than $1 billion into the lender. NYCB’s troubles began in late January with a disastrous fourth-quarter earnings report that shocked analysts at the level of provisions for loan losses. The bank’s shares fell amid multiple management changes and a rating agency downgrade.
NYCB has “identified an opportunity” to sell $5 billion of assets to improve the company’s liquidity levels, Oetting told analysts on a conference call. This deal could be completed within 60-70 days and could be announced soon, he added.
The bank had a provision for credit losses of $315 million in the quarter, down from $170 million in the prior year, and said it expected provision levels to increase through the end of 2024.
Nonperforming loans rose $370 million to $798 million in the quarter beginning in the fourth quarter of 2023 as high interest rates hurt commercial real estate borrowers.
As a reserve for future expected loan losses, NYCB assumed office property values fell 42% and multifamily building values fell about 30%, executives said on a call with analysts.
“The office market is under a lot of stress,” Oetting said. “It was a couple of stressed office loans that got to the point where investors decided to just come to us and we had to take over the property.”
The bank will seek to reduce its share of office and multifamily loans over time by managing customer relationships to exclude those who do not keep deposits with NYCB, Oetting said.
The results and targets came as a relief to analysts worried that NYCB might miss an opportunity to report results. The bank did not announce its earnings on Wednesday until late Tuesday.
“Overall, we believe the results are better than worst-case scenario concerns” with a “reasonable” level of reserve build-up, analysts led by Ken Ustin of Jefferies wrote in a note.