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Moody's confirms ratings for Astoria Financial, assigns negative outlook

Moody's on Dec. 21 confirmed its ratings for Lake Success, N.Y.-based Astoria Financial Corp., and assigned a negative outlook to the ratings following the termination of the company's deal with New York Community Bancorp Inc.

Moody's confirmed Astoria's senior unsecured debt rating of Baa3, issuer rating of Baa3 and noncumulative preferred stock rating of Ba2(hyb). The company's rating outlook was changed to negative from rating under review.

For unit Astoria Bank, the rating agency confirmed the bank's long-term deposits at A3, short-term deposits at P-2, issuer rating at Baa3, baseline credit assessment at "baa2," adjusted baseline credit assessment at "baa2," and long-term counterparty risk assessment at Baa1(cr). Like its parent, the bank's rating outlook was changed to negative from rating under review.

Moody's noted that Astoria has seen improvement in its capital ratios since the financial crisis, and has strong capitalization and sound asset risk, but that these are offset by inferior profitability and liquidity ratios compared to similarly rated peers.

In addition, the negative rating outlook factors in Astoria's strategic challenges which include management's capacity to refocus on being an independent company, execution risk related to current efforts to expand commercial banking segments — especially New York City multifamily lending — in a highly competitive market, and boosting low return on equity through improving profitability and/or increasing leverage.