New York Community Bancorp
stock rose early Friday and the broader regional banking sector stabilized after a two-day selloff.
New York Community Bancorp’s stock was 5% up in early trading. The shares have fallen 45% over the past two trading days since the bank posted a surprise loss and announced a drastic reserve increase Wednesday. The shares closed Thursday at their lowest level since 2000.
The broader sector has also been hit since the lender announced Wednesday that it added $552 million to its loan-loss provision, largely related to real estate loans, and slashed its dividend.
The stocks look to be stabilizing at the end of a tumultuous week, even after the January employment report showed that the U.S. economy added 353,000 jobs, crushing expectations of 176,500. The strong reading makes it less likely that the Federal Reserve will cut rates in March, something which would have eased the pressure on regional banks.
Traders were pricing in an 21% chance of a March rate cut shortly after the jobs data, down from 38% just a day ago, according to the CME’s FedWatch tool.
Other regional bank stocks were rising despite that shift in rate expectations.
Western Alliance
was 2% up,
M&T Bank
rose 1.2%, while
Zions Bancorp
was flat.
Investors and analysts have been assessing the fallout of NYCB’s loss and reserve increase in recent days, particularly in light of last year’s regional bank crisis.
“What NYCB’s troubles coming on the heels of last March’s failure should teach us, is that the small, regional bank business model is unalterably broken,” Oppenheimer analyst Chris Kotowski said in a note Friday.
“The sooner the small banks gets consolidated the better for us all. The big banks actually have a pretty darn good and resilient business model,” he added.
While
J.P. Morgan’s
Kabir Caprihan wrote Thursday that he didn’t believe we’re seeing a repeat of 2023, he noted that reserves on office real estate loans were lower than most peers at two banks: Zions Bancorp and M&T Bank. At year end, the loss reserves on office properties were 3.8% of loans at Zions and 4.4% at M&T, by the analyst’s tally, compared with 8% at
New York Community Bank
after this week’s accrual.
The KBW Regional Banking Index fell 2.3% Thursday, following its 6% decline in the previous session. The index was flat early Friday.
Write to Callum Keown at [email protected]
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