New York Community Bancorp faced a significant setback in after-hours trading on Thursday, with its shares plummeting over 20% following the announcement of leadership changes and revelations regarding internal control issues. Alessandro DiNello, the executive chairman, assumed the roles of president and CEO with immediate effect. The decision comes amidst mounting concerns about the bank’s exposure to commercial real estate, contributing to its recent pressures.
In a disclosure made by the regional bank, an amendment to its fourth-quarter results highlighted concerns about internal risk management, identifying material weaknesses in internal controls related to loan review processes. These weaknesses were attributed to ineffective oversight, risk assessment, and monitoring activities, as stated in a filing with the U.S. Securities and Exchange Commission.
DiNello, who previously served as the CEO of Flagstar Bank, acquired by NYCB in 2022, took over as executive chairman earlier in February. The leadership transition follows Moody’s Investors Service downgrading NYCB’s credit rating to junk status, underscoring the challenges the bank has faced recently.
Despite these hurdles, DiNello expressed confidence in the bank’s trajectory and its commitment to stakeholders. He emphasized the changes underway within the board and leadership team, signaling a new chapter for the institution.
Marshall Lux assumed the role of presiding director of the NYCB board, succeeding Hanif Dahya, in another leadership change. Lux’s prior experience as the global chief risk officer for Chase Consumer Bank at JP Morgan underscores the board’s focus on bolstering risk management capabilities.
The downturn in NYCB’s shares, which have declined by 53% year-to-date, was precipitated by the bank’s revelation on January 31st of a larger-than-expected charge against potential loan losses. This disclosure reignited concerns about the state of the commercial real estate market and the resilience of regional banks, echoing broader anxieties in the financial sector. The aftermath of loan losses has notably led to the failure of several regional banks in 2023, including Silicon Valley Bank, with NYCB itself being involved in the acquisition of Signature, one of the failed banks, in March of the previous year.