New York Community Bancorp Delays Profitability Goal

By Niket Nishant and Manya Saini

(Reuters) – New York Community Bancorp (NYCB) has postponed its profitability target by a year following its fourth consecutive quarterly loss, highlighting the strain from its commercial real estate (CRE) exposure despite cost-cutting measures and the sale of non-core assets.

Shares of NYCB fell 9% in early trading on Friday after disclosing in its third-quarter earnings report that it would not turn a profit until 2026. The lender has been under pressure since report a surprise loss in January but saw some recovery after management changes aimed at reducing its CRE loan portfolio.

Borrowers face challenges as remote work has diminished demand for office spaces, while high interest rates are affecting multi-family loans, resulting in a four-fold increase in loan-loss provisions to $242 million this third quarter. “We continue to proactively manage our problem loans and take appropriate action to de-risk the loan portfolio,” stated CEO Joseph Otting.

The rise in charge-offs has prompted regional lenders to boost provisions for the CRE sector, with NYCB reporting net charge-offs of $388 million on existing office loans.

The bank had initially aimed for breakeven or a profit of 5 cents per share in 2025 but now projects a loss of 30 to 35 cents per share. For 2026, the profit forecast has also been reduced from $1.25-$1.30 per share to $0.75-$0.80.

To reverse its fortunes, NYCB is selling assets and has partnered with an investor group led by former U.S. Treasury Secretary Steven Mnuchin's Liberty Strategic Capital. However, this turnaround may take longer than anticipated due to uncertain interest rates and high deposit costs. “We’re exploring all opportunities to reduce our non-accrual portfolio,” the bank noted.

Earlier this month, NYCB announced the layoff of 700 employees, accounting for 8% of its workforce, and another 1,200 will exit as it completes the divestiture of its mortgage servicing and third-party origination business. In the third quarter, net interest income fell 42% to $510 million, while the net loss for common shareholders was $289 million, or 79 cents per share, compared to a profit of $199 million, or 81 cents per share, a year ago.

On an adjusted basis, the per-share loss of 69 cents exceeded analysts' expectations of 40 cents. Meanwhile, the KBW Regional Banking Index, a key indicator of investor sentiment in the sector, decreased by 0.6%.