Fitch downgraded New York Commercial Bank to junk, with Moody's rating deepening

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

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

Fitch said the discovery of the bank's weaknesses “prompted a reconsideration of the Bank of New York's controls over provision adequacy, particularly with respect to its concentrated exposure to commercial real estate.”

Read more: New York Commercial Bank points out weaknesses in loan monitoring and appoints new CEO

The bank's announcement Thursday that it needs to support loan reviews has reignited investor concerns about the company's potential exposure to distressed commercial landlords, including apartment owners in New York. The stock fell 26% on Friday, although the company said it did not expect control weaknesses to lead to changes in its provisions for credit losses.

“Moody's believes that New York Commercial Bank may have to increase its provisions for credit losses over the next two years due to the credit risk on its office loans,” the credit rating agency said in a statement. It also cited “significant repricing risks on 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,” CEO Alessandro Dinello, who took over this week, said in a statement earlier on Friday. “I am confident that we will execute on our transformation plan to deliver increased shareholder value.”

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