Banking fears stir once again

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Trouble is brewing around another U.S. regional lender that has renewed Wall Street worries.

New York Community Bank moved quickly to reassure investors about its financial health after Moody’s cut its credit rating to junk.

The bank also named Alessandro DiNello as the new executive chairman to help stabilize the operations.  

Trying to calm market jitters, DiNello said NYCB has seen “virtually no deposit outflow” from retail branches, adding its liquidity position remained strong.

The moves sparked a 7% jump in NYCB shares Wednesday after an initial decline. Yet, it’s a small dent in the stock’s more than 50% fall since the bank posted a surprise fourth-quarter loss last week. Fears were also exacerbated as the results showed mounting losses on commercial real estate.

Moody’s cited “multi-faceted financial, risk-management and governance challenges” at NYCB in its note late Tuesday downgrading the bank.

“In Moody’s view, control functions with strong knowledge of a bank’s risks are key to a bank’s credit strength.”

NYCB’s problems are reminiscent of the pressure the sector came under last year following the failure of Silicon Valley Bank, that sparked a regional banking crisis.  

It remains to be seen whether the latest measures will be enough to boost investor confidence or will there be more surprises to come.

— CNBC’s Hugh Son contributed to this report.