NYCB Shares Plummet Following CEO Change and Internal Controls Issue

Shares of New York Community Bancorp (NYCB) experienced a significant drop of over 20% during after-hours trading on Thursday. The decline came in response to the bank’s announcement of a change in leadership and the disclosure of internal controls issues.

NYCB, a regional bank, revealed that Alessandro DiNello, its executive chairman, has assumed the roles of president and CEO with immediate effect. The bank has faced mounting pressure in recent months, primarily stemming from concerns about its exposure to the commercial real estate market.

The bank’s amendment to its fourth-quarter results included a disclosure regarding its internal risk management. According to a filing with the U.S. Securities and Exchange Commission, NYCB’s management identified material weaknesses in its internal controls related to internal loan review. These weaknesses were attributed to ineffective oversight, risk assessment, and monitoring activities.

DiNello’s appointment as executive chairman earlier in February followed Moody’s Investors Service downgrading NYCB’s credit rating to junk status. Despite recent challenges, DiNello remains optimistic about the bank’s future, stating, “The changes we’re making to our Board and leadership team are reflective of a new chapter that is underway.”

Another leadership change was the elevation of Marshall Lux to presiding director of the NYCB board, replacing Hanif Dahya. Lux previously served as the global chief risk officer for Chase Consumer Bank at JP Morgan.

NYCB’s shares have experienced a 53% decline year-to-date, largely triggered by its disclosure on January 31st of a larger-than-expected charge against potential loan losses. This disclosure rekindled concerns about the state of the commercial real estate market and regional banks in general. In 2023, several regional banks collapsed as customers and investors grew apprehensive about the value of the debt on their balance sheets, including Silicon Valley Bank. Interestingly, NYCB acquired one of these failed banks, Signature, in March of last year.

Despite the recent setbacks, NYCB remains confident in its ability to navigate these challenges and serve its customers, employees, and shareholders in the long term. The bank views the leadership changes as a pivotal moment in its ongoing transformation.

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