Regional Bank Stocks Stumble

NYCB's exposure to commercial real estate has seen its losses pile up. The question is, will there be others?

Are more banks in line for trouble?

The regional banking crisis has reared its head again, as New York Community Bancorp suffered crushing falls on the stock market. The bank cut its dividend after reporting an unexpected quarterly loss and being forced to earmark millions of dollars for potential future losses. NYCB shares fell 37% on Wednesday and another 11% on Thursday.

NYCB, which purchased the struggling Signature Bank in the crisis that threatened regional banks a year ago, suffered significant losses on its commercial real estate portfolio. The CRE sector has long been faltering, not least due to changing work patterns prompted by the coronavirus pandemic and soaring interest rates.

Commercial Real Estate And The Next Financial Crisis
2008’s financial crisis was caused by bad real estate loans. Good job we learn from our mistakes. Right?

NYCB's troubles brought contagion for the rest of the regional banking sector. The BKW Regional Banking Index fell around 10% in two days.

KBW Regional Banking Index (TradingView)
The KBW Regional Banking Index suffered significant falls last week.

NYCB is primarily a CRE lender. The sector has performed badly, as offices and certain types of apartment fall in value thanks to the impact of the pandemic and higher interest rates. Regional banks typically hold more of this type of debt than their larger counterparts. There are concerns that as these loans fall due, or need to be rolled over, losses will stack up and more regional banks will go bankrupt.

While NYCB is one specific case, and other banks have different exposure to CRE, the Fed's recent decision to likely hold interest rates at 525-550 bps until May could see further problems come to light.

Bitcoin And The Banking Sector

When regional banks came close to melting down last year, bitcoin performed well (though it's hard to attribute that as a sole or direct cause). As the narrative for bitcoin grows, renewed troubles in the banking sector will potentially provide further tailwinds.

For now, the problems that have affected New York Community Bancorp are isolated. Analysts will be watching carefully for signs this could be Round 2.


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