New York Community Bank stocks plummeted after trading on Thursday in the US stock market.
On February 29th local time, Community Bank of New York closed up 5.18%, but experienced a sharp drop in post market trading hours; As of 8:50 am Beijing time on March 1st, its post market decline exceeded 22%.
On the news front, on Thursday local time, the New York Community Bank stated in a document that it had written down $2.4 billion in goodwill due to issues with the loan review process. The management has identified significant deficiencies in internal controls related to loan review, including inadequate supervision, risk assessment, and monitoring.
The bank announced that a new leadership has been appointed to address the current situation, and Alessandro DiNello will replace Thomas Cangemi as CEO. In addition, due to significant deficiencies in internal controls, New York Community Bank will have to postpone the release of its 2023 annual report.
In fact, due to lower than expected financial data, New York Community Bank also experienced a sharp drop in stock prices in early February. CCTV News reported on February 6th that international rating agency Moody's Investor Services announced a downgrade of the credit rating of New York Community Bank to "junk" due to concerns about the "challenges" the bank is currently facing.
Will the explosion of the New York Community Bank trigger a chain reaction?
Lin Yingqi, a banking analyst at CICC, believes that after the Silicon Valley banking risk event, the Federal Reserve launched the liquidity support tool BTFP, which effectively alleviated the risk of deposit runs. Nevertheless, the impact of the high interest rate environment in the United States on bank liabilities continues to be evident, with money market funds growing significantly faster than deposits. The scale of large term deposits with higher internal interest rates has increased, while the scale of general deposits with lower interest rates has continued to decline. Banks facing the risk of bank runs have a debt cost of approximately 4.5% -5.0% using BTFP tools (with interest rates rising to around 5.4% after the increase), which is significantly higher than the average cost of deposits of around 1.6%, which may put pressure on net profits. In addition, the BTFP tool will be discontinued on March 11, 2024, and it is still worth paying attention to whether it has caused concerns among depositors. If there are subsequent runs, the liquidity risk of small and medium-sized banks in the United States may rise again.