NYCB shares tumble 26% after 'material weakness' disclosure rattles investors

investing.com:

By Niket Nishant and Nupur Anand

(Reuters) -New York Community Bancorp (NASDAQ:CTBI) shares plunged nearly 26% on Friday after it replaced its CEO, reported a fourth-quarter loss that was more than 10 times what it previously stated and said it found «material weaknesses» in internal controls related to a loan review.

The news spooked already jittery investors, with NYCB shares down 65% this year.

«NYCB looks like a bank that is out of control, and it seems likely that they will have to take even steeper charges for loan loss provisions,» said Octavio Marenzi, CEO of advisory and consulting firm Opimas LLC.

The bank's shares closed down 25.9% at $3.55.

NYCB has been under pressure since it cut its dividend and posted a surprise fourth-quarter loss on Jan. 31, citing higher provisions tied to Commercial Real Estate loans.

Late on Thursday, the lender revised its quarterly loss to $2.7 billion, citing a $2.4 billion goodwill impairment tied to transactions from 2007 and before.

The lender's market value tumbled about $900 million on Friday, bringing its total loss of market capitalization to almost $5 billion since Jan. 31.

NYCB said the weaknesses it disclosed on Thursday were related to «ineffective oversight, risk assessment and monitoring activities,» but would not impact financial results for fiscal 2023.

Citigroup analyst Keith Horowitz said the impairment should not be seen as a big surprise, but material weakness was a bigger issue.

«Significant changes will need to be made with respect to how they monitor credit risk, which we expect may lead to them being more proactive on recognizing issues,» he said.

NYCB said it will detail the remediation plan when it files its annual report with the Securities and Exchange