(Bloomberg) -- New York Community Bancorp’s stock fell as much as 17% after reporting provisions for loan losses higher than every analyst’s estimate.
The second-quarter loan provision was $390 million, well above the average estimate of $193 million. The figure reflects an increase in charge-offs, primarily office loans, and the continuing impact of higher interest rates and inflation on the bank’s multifamily portfolio, NYCB said in a statement Thursday.
At the same time, the firm said its Flagstar Bank unit agreed to sell its residential mortgage-servicing business to Mr. Cooper Group Inc. for about $1.4 billion. The transaction, which is expected to be completed in the fourth quarter, will add about 60 basis points to the company’s common equity tier 1 capital ratio.
NYCB Chief Executive Officer Joseph Otting is overhauling the company’s balance sheet, as concerns about its outsized exposure to commercial real estate in New York weighed down the stock earlier this year. Otting said that while the mortgage-servicing business has made significant contributions to the company, he also recognizes the financial and operational risks it could pose in a volatile interest-rate environment.
“We are focused on transforming the bank into a leading, relationship-focused regional bank,” Otting said in the statement. “Consistent with that strategy, we will continue to provide residential mortgage products to the bank’s retail and private wealth customers.”
The shares fell 11% to $9.70 at 9:49 a.m. in New York after sinking to $9.11 earlier Thursday, the steepest intraday drop since March 6.
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