(Reuters) – Credit rating agency Moody’s on Tuesday cut New York Community Bancorp’s rating on all long-term and some short-term bonds to “junk” and warned of further downgrades.
The agency also downgraded all long-term and some short-term ratings and reviews of its lead bank, Flagstar Bank.
Moody’s downgraded NYCB from Baa3 to Ba2, which is considered a junk rating.
The downgrade reflects Moody’s view that NYCB faces significant governance risks as a result of the transition regarding the leadership of the second and third lines of defense – the bank’s risk and audit functions – at a crucial time, the agency said.
Moody’s said NYCB’s flagship historic commercial real estate (CRE) loans, the significant and unexpected loss on its New York office and multifamily properties, could create potential confidence sensitivity.
The increased use of market financing may limit the bank’s financial flexibility in the current environment, the rating agency said.
NYCB did not immediately respond to a Reuters request for comment.
The bank last week set aside higher-than-expected provisions for potentially bad loans, mainly due to its exposure to CRE, where several borrowers are at risk due to high interest rates and low occupancy rates.
At least 13 brokerages have cut or lowered their price targets for the bank’s stock since the earnings report.
(Reporting by Gursimran Kaur and Shivani Tanna in Bengaluru; Editing by Rashmi Aich)