Regional lender New York Community Bancorp (NYCB) offered a new reminder Friday that commercial real estate problems are not totally in the rear-view mirror of US banks.
The Hicksville, N.Y.-based regional lender posted higher loan loss provisions and loan write-offs in the third quarter than Wall Street expected. It also reported its fourth consecutive quarterly loss, of $280 million, and delayed its goal of turning profitable by a year to 2026.
Its stock was down more than 8% Friday morning. As of Friday morning, it has fallen 66% since the beginning of the year.
NYCB is a big lender to office buildings and rent-regulated apartment complexes, especially in New York City. With $114 billion in assets, it is one of the country’s 30 largest banks.
Its stock began plummeting in January after the bank set aside more money for real estate loan losses related in part to those apartment complexes in the New York City area.
NYCB was able to calm the market with an emergency equity infusion from a group that included former Treasury Secretary Steven Mnuchin. A new team began cutting the bank’s exposure to commercial real estate while selling businesses, cutting costs, and laying off employees.
Earlier this year, the bank pledged as part of its turnaround it would turn a profit or break even in 2025.
But on Friday, the bank pushed that forecast to 2026 while also lowering what it estimates it will earn in that breakthrough year.
The company is making a seismic change, and that commercial bank is going to be better in 2026 and 2027 from a profit and structure and franchise value perspective,” Janney analyst Chris Marinac told Yahoo Finance. “It’s simply going to be more expensive for them to make the transition in 2025.”
NYCB is not the only bank still working its way through commercial real estate burdens.
Wells Fargo (WFC) CEO Charlie Scharf said on Thursday that his bank may lose $2 billion to $3 billion on its commercial real estate office loan portfolio and that the problems are expected to play out over the next three to four years.
“We’re going to lose $2 to $3 billion, it’s a lot of money,” Scharf said at an event in Washington Thursday. “On the other hand, we’ve reserved for all of it.”
Two weeks ago, Wells Fargo disclosed that it had an allowance of $2.42 billion for future credit losses.
Scharf said concerns about commercial real estate are waning, however, as interest rates start to come back down, and that most of the problems are concentrated among office buildings that are emptier than they were pre-pandemic
