Fitch Downgrades NYCB To Junk, As Moody's Digs Deeper

(Bloomberg) — Fitch Ratings cut New York Community Bancorp's credit rating to junk, and Moody's Investors Service lowered its rating further, a day after the commercial real estate lender said it discovered “material weaknesses” in the company's in which it tracks credit risks. .

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Fitch downgraded the bank's long-term issuer default rating to BB+, one notch below investment grade, from BBB-, according to a statement Friday. Moody's, which downgraded the bank to junk status last month, downgraded its issuer rating to B3 from Ba2.

The bank's discovery of weaknesses “prompted a reconsideration of NYCB's controls around the adequacy of sourcing, particularly with respect to its concentrated exposure to commercial real estate,” Fitch said.

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The bank's announcement Thursday that it needs to beef up loan reviews revived investor concerns about the company's possible exposure to distressed commercial property owners, including New York apartment owners. The stock plunged 26% on Friday, even as the company said it does not expect control weaknesses to result in changes to its allowance for credit losses.

“Moody's believes NYCB may have to further increase its credit loss provisions over the next two years due to the credit risk of its office loans,” the credit rating agency said in a statement. It also noted a “substantial revaluation risk of its multifamily loans.”

NYCB 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 Alessandro DiNello, who took over this week, said in a statement Friday. “I am confident that we will execute our turnaround plan to deliver greater value for shareholders.”