NYCB stock surges 30% as CEO unveils comprehensive two-year plan for achieving ‘profitability’

New York Community Bank (NYCB) has experienced a surge in stock prices of up to 30% following the unveiling of a comprehensive two-year plan for achieving profitability. The bank reported a quarterly loss of $335 million, primarily due to an increase in soured commercial loans and higher expenses. However, investors were optimistic about the bank’s new performance targets.

Under the leadership of CEO Joseph Otting, NYCB aims to transform into a high-performing, well-diversified regional bank. Otting stated that while this year will be a transitional period for the company, they have a clear path to profitability over the next two years. By the end of 2026, NYCB plans to achieve higher profitability and capital levels, including a return on average earning assets of 1% and a targeted common equity tier 1 capital level of 11% to 12%.

The announcement of the bank’s plan resulted in a 33% jump in NYCB’s stock during early trading. Otting took over as CEO in April after an investor group, led by former Treasury Secretary Steven Mnuchin, injected over $1 billion into the struggling regional bank. NYCB had faced challenges, including a disappointing fourth-quarter earnings report, multiple management changes, and rating agency downgrades.

To improve liquidity levels, NYCB has identified an opportunity to sell $5 billion in assets. Otting mentioned during an analyst call that the transaction could close within 60 to 70 days and may be announced soon. The bank also expects an elevated rate of provisioning for credit losses throughout 2024, with nonperforming loans increasing by $370 million in the first quarter.

NYCB’s provision for credit losses in the quarter was $315 million, compared to $170 million in the same period last year. The bank assumed a decline in value of office properties by 42% and multifamily buildings by approximately 30%. Otting acknowledged that the office market is under stress and mentioned that they had to take over certain stressed office loans.

In an effort to reduce exposure to office and multifamily loans, NYCB plans to manage client relationships and drop those who do not maintain deposits at the bank. The bank’s results and targets have provided relief to analysts who were concerned about NYCB’s ability to report favorable outcomes. Analysts believe that the results exceeded worst-case expectations, especially considering the reasonable amount of reserve builds.

Overall, NYCB’s two-year plan for achieving profitability has instilled confidence in investors, leading to a surge in stock prices. With a focus on transforming into a high-performing regional bank, NYCB aims to improve profitability and capital levels. The bank’s efforts to reduce exposure to risky loans and improve liquidity levels have been well-received by analysts. As NYCB moves forward with its plan, stakeholders will be closely watching its progress towards achieving profitability.