NYCB jitters about fleeing depositors mount amid another Moody's ratings downgrade

Investing.com -- New York Community Bancorp 's wild ride lower continued Monday as concerns about rising funding costs and depositors fleeing the regional bank mount after major credit ratings agency Moody's (NYSE:MCO) cut its ratings on the bank's ability to pay back its creditors for the second time in a month.  

New York Community Bancorp Inc (NYSE:NYCB) closed 23% lower on Monday.

Moodys' investors Services slashed NYCB's long-term credit rating by four notches to B3 from Ba2, further below investment grade, warning that the regional bank may have to increase in credit loss provisions, setting more money aside to cover a potential default on loans over the next two years. 

Fellow credit rating agency Fitch Ratings downgraded NYCB's credit rating to junk last week and its Flagstar Bank subsidiary's rating to B from BBB-,  which is the lowest investment grade rating and above junk.

The move comes after the beleaguered lender recently flagged "material weaknesses" in its internal controls related to loan review. 

Other credit rating agencies, however, don't expect to deliver further credit rating downgrades following the regional bank's steps to shore-up risk controls and operations including the appointment of key personnel with large bank experience. 

"Further credit rating actions are not anticipated at this time. However additional missteps or pressure on the franchise would result in a further credit rating downgrade," Morningstar DBRS, the fourth largest credit ratings agency, said in a recent note. The credit rating agency previously downgrade NYCB to BBB from BBB (high) in February. 

"The new hires have large bank experience which should help the company navigate more complex issues as well as greater regulatory requirements that come with being a banking company with over $100 billion in asset," Morningstar said.

A spike in costs to retain depositors or material increase in loan loss provisions, however, could force another downgrade, Morningstar said. The credit ratings would be downgraded if NYCB is "unable to maintain deposit funding at a reasonable cost, or reports another outsized loan loss provision."