NYCB shares jump 30% after CEO gives two-year plan for 'clear path to profitability'

New York Community Bank on Wednesday posted a quarterly loss of $335 million on a rising tide of soured commercial loans and higher expenses, but the lender's stock surged on its new performance targets.

The first-quarter loss, equal to 45 cents per share, compared to net income of $2.0 billion, or $2.87 per share a year earlier. When adjusted for charges included merger-related items, the loss was $182 million, or 25 cents per share, deeper than the 15 cents per share loss estimate from LSEG.

"Since taking on the CEO role, my focus has been on transforming New York Community Bank into a high-performing, well-diversified regional bank," CEO Joseph Otting said in the release. "While this year will be a transitional year for the company, we have a clear path to profitability over the following two years."

The bank will have higher profitability and capital levels by the end of 2026, Otting said. That includes a return on average earning assets of 1% and a targeted common equity tier 1 capital level of 11% to 12%.

Shares of the bank jumped 33% in early trading.

Otting took over at the beleaguered regional bank at the start of April after an investor group led by former Treasury Secretary Steven Mnuchin injected more than $1 billion into the lender. NYCB's troubles began in late January with a disastrous fourth-quarter earnings report when it shocked analysts with its level of loan loss provisions. The bank's stock plunged amid multiple management changes and rating agency downgrades.

NYCB has "identified an opportunity" to sell $5 billion in assets to boost the company's liquidity levels, Otting told analysts during a conference call. That transaction could close within 60 to 70 days and may be announced soon, he added.

The bank had a $315 million provision for credit losses in the quarter, compared with $170 million in the year-earlier period. Non-performing loans surged by $370 million to $798 million in the quarter from the fourth quarter of 2023 as high interest rates took a toll on commercial real estate borrowers.    

As it provisioned for future expected loan losses, NYCB assumed that office properties declined 42% and multifamily buildings fell roughly 30% in value, executives said during the analyst call.

"The office market is pretty stressed," Otting said. "It was a couple of stressed office loans that got to the point where the investors chose to just come to us, and we had to take take over the property."

The bank will reduce exposure to office and multifamily loans by managing client relationships by emphasizing those who keep deposits at NYCB, Otting said.  

"Overall, we believe results are better than worst-case fears" on a "reasonable" amount of reserve builds, analysts led by Ken Usdin of Jefferies wrote.