Regional lender New York Community Bancorp (NYCB) on Friday once again warned that commercial real estate issues are not entirely in the rearview mirror of U.S. banks.
The Hicksville, New York-based community lender posted higher loan loss provisions and loan charge-offs in the third quarter than Wall Street expected. The company also posted a loss of $280 million for four consecutive quarters, delaying its goal to return to profitability by one year until 2026.
The company’s stock price was down more than 8% on Friday morning. As of Friday morning, it was down 66% since the beginning of the year.
NYCB is a major lender to office buildings and rent-regulated apartment buildings, especially in New York City. With total assets of $114 billion, the company is one of the nation’s 30 largest banks.
The company’s stock price began to fall sharply in January after the bank put aside additional funds to protect against losses on real estate loans tied in part to apartment complexes in the New York City area.
NYCB was able to calm the market with an emergency stock injection from a group that included former Treasury Secretary Steven Mnuchin. The new team began reducing the bank’s exposure to commercial real estate while selling businesses, cutting costs and laying off employees.
Former Treasury Secretary Steven Mnuchin led the NYCB bailout earlier this year. (Reuters/Mike Blake) · Reuters/Reuters
The bank pledged earlier this year to be profitable or break even in 2025 as part of its turnaround.
But on Friday, the bank extended that forecast to 2026, while also lowering its expected profits for that landmark year.
Johnny analyst Chris Marinak told Yahoo Finance: “The company is undergoing dramatic changes, and its commercial bank is expected to do even better in 2026 and 2027 from a profit, structure and franchise value standpoint. It will happen,” he said. “Moving to 2025 will simply be more expensive.”
NYCB is not the only bank still solving the burden of commercial real estate.
Wells Fargo (WFC) Chief Executive Officer Charlie Scharf said Thursday that the bank could lose $2 billion to $3 billion in its commercial real estate office loan portfolio and that the issue will continue over the next three to four years. It is expected that this will continue.
“We’re going to lose $2 billion to $3 billion. That’s a lot of money,” Schaaf said Thursday at an event in Washington. “On the other hand, we booked everything.”
Charlie Scharf, CEO of Wells Fargo. (Reuters/Mike Blake/File Photo) · Reuters/Reuters
Wells Fargo announced two weeks ago that it has $2.42 billion in reserves for future credit losses.
But Schaaf said concerns about commercial real estate are waning as interest rates begin to return, and most of the problems are centered on office buildings that are more vacant than before the pandemic.
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It’s “not something we see as catastrophic, nor should it have knock-on effects on other asset classes.”
An October study released Thursday by the Mortgage Bankers Association reports that delinquency rates for non-office CRE loans are beginning to ease, even as delinquency rates for office building loans continue to rise. .
NYCB has about $2.6 billion in office loans, but has greater exposure to multifamily properties.
As of the third quarter, approximately 45% of investment loans were related to multifamily properties, many of which are rent-regulated buildings in New York state that were affected by the 2019 New York law changes.
New York Community Bancorp stock trades on the New York Stock Exchange (NYSE) in New York City on February 7th. (Reuters/Brendan McDiarmid) · Reuters/Reuters
New CEO Joseph Otting, a former head of the U.S. Office of the Comptroller of the Currency, is leading a comprehensive review of multifamily mortgages and other commercial real estate loans as part of the bank’s restructuring efforts.
The company also recently announced plans to cut approximately 22% of its workforce. Of these, 700 positions have already been eliminated. The company plans to cut an additional 1,200 jobs by the end of the year as it completes the sale of its mortgage repayment and third-party origination businesses.
The company will also officially change its name to Flagstar Financial, Inc. today at 5 p.m. ET. On Monday, the bank’s stock will cease trading under its current NYCB ticker symbol and will instead trade under the symbol FLG.
Flagstar’s name comes from the Troy, Michigan-based lender that NYCB acquired in December 2022.
One of the key reasons for the bank’s revenue forecast change is that expenses will increase by $50 million to $100 million in 2024 and $100 million to $150 million in 2025 and 2026. .
“I’m really happy with the people and the direction we’re going,” Otting told analysts Friday.
David Hollerith is a senior reporter at Yahoo Finance, covering banking, cryptocurrencies, and other financial areas.
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