Rating action follows the firm's announcement to repurchase $300 million of common shares
New York, October 25, 2018 -- Moody's Investors Service ("Moody's") has affirmed the Baa2 long-term
issuer rating of New York Community Bancorp, Inc. (NYCB)
and the A2/Prime-1 long- and short-term deposit ratings
of its bank subsidiary New York Community Bank. This follows the
affirmation of the bank's baa1 standalone baseline credit assessment
(BCA) and adjusted BCA. The ratings outlook was changed to negative
from stable.
This rating actions follow NYCB's announcement that it intends to repurchase
$300 million of its common equity financed by issuing a corresponding
amount of subordinated debt.
List of affected ratings:
Outlook Actions:
..Issuer: New York Community Bancorp, Inc.
....Outlook, Changed To Negative From
Stable
..Issuer: New York Community Bank
....Outlook, Changed To Negative From
Stable
Affirmations:
..Issuer: New York Community Bancorp, Inc.
.... Issuer Rating, Affirmed Baa2,
Changed to Negative from Stable
....Preferred Shelf Non-cumulative,
Affirmed (P)Ba1
....Preferred Shelf, Affirmed (P)Baa3
....Senior Unsecured Shelf, Affirmed
(P)Baa2
....Subordinate Shelf, Affirmed (P)Baa2
....Pref. Stock Non-cumulative
Preferred Stock, Affirmed Ba1(hyb)
..Issuer: New York Community Bank
.... Adjusted Baseline Credit Assessment,
Affirmed baa1
.... Baseline Credit Assessment, Affirmed
baa1
.... Long Term Counterparty Risk Assessment,
Affirmed A3(cr)
.... Short Term Counterparty Risk Assessment,
Affirmed P-2(cr)
.... Short Term Counterparty Risk Rating,
Affirmed P-2
.... Long Term Counterparty Risk Rating,
Affirmed Baa1
.... Short Term Deposit Rating, Affirmed
P-1
.... Long Term Deposit Rating, Affirmed
A2, Changed to Negative from Stable
..Issuer: New York Community Capital Trust V
....Backed Preferred Stock, Affirmed
Baa3(hyb)
RATINGS RATIONALE
The affirmation of New York Community Bank's baa1 BCA and of all
ratings reflects Moody's view that, notwithstanding the expected
decline in the firm's tangible common equity (TCE) as a result of
the firm's announcement to repurchase $300 million of its
common shares, NYCB still maintains an adequate capital cushion
protecting it from unexpected losses. NYCB has historically reported
low credit losses through the economic cycle on its loan portfolio,
which largely comprises multifamily mortgages on rent-regulated
properties, primarily in the New York metropolitan area.
Multifamily mortgages account for around 74% of the company's
loan book, as of September 30, 2018. Moody's
believes that the firm's strong asset quality track record reflects
its conservative underwriting standards and longstanding expertise in
this niche market.
Low credit losses and good operating efficiency levels have supported
NYCB's profitability through credit cycles, which Moody's
expects to improve further over the next 12-18 months, following
the removal of its self-imposed growth restraints. At the
same time, Moody's cautions that excessive loan growth could
pressure the firm's capitalization.
The change in ratings outlook to negative from stable reflects the company's
expected capitalization reduction, as measured by its Moody's
TCE ratio by approximately 85 basis points in total, to around 10.1%.
The firm has however indicated that the share repurchase program may occur
in multiple blocks depending on market conditions. The share repurchase
also increases NYCB's concentration in commercial real estate (CRE)
to 10.2 times from 9.4 times of its TCE at June 30,
2018, further widening the gap with its US rated peers. The
negative ratings outlook also reflects that asset growth may further pressure
NYCB's capitalization, given that management is no longer
constraining its asset growth, following the increase in the systemically
important financial institution (SIFI) asset threshold to $250
billion from $50 billion, with the passage of the Economic
Growth, Regulatory Relief, and Consumer Protection Act in
May of 2018.
Factors that Could Lead to an Upgrade
The ratings outlook could return to stable if the firm's capitalization
were to stabilize or strengthen, following the completion of the
share repurchase programme. The bank's baa1 standalone BCA
could be upgraded if it were to reduce its CRE exposure without significantly
increasing its asset risk and improve its core funding to levels comparable
with US-rated peers. A higher BCA would likely lead to a
ratings upgrade.
Factors that Could Lead to a Downgrade
Rapid growth, whether organic or through acquisition, or other
actions that would further weaken NYCB's capitalization would pressure
its BCA. Evidence that NYCB's underwriting standards are loosening
would also be negative for the BCA. A lower BCA would likely lead
to a ratings downgrade.
The principal methodology used in these ratings was Banks published in
August 2018. Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
New York Community Bancorp, Inc. is a bank holding company
headquartered in Westbury, New York and reported $51.2
billion of consolidated assets as of 30 September 2018.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides certain regulatory
disclosures in relation to the provisional rating assigned, and
in relation to a definitive rating that may be assigned subsequent to
the final issuance of the debt, in each case where the transaction
structure and terms have not changed prior to the assignment of the definitive
rating in a manner that would have affected the rating. For further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Rita Sahu
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
M. Celina Vansetti-Hutchins
MD - Banking
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
