Regional-bank stocks were lower across the board on Friday, dragged down by the latest bad news from New York Community Bancorp Inc. that included the disclosure of ”material weaknesses” in its accounting.
NYCB
NYCB,
was down 25% after it announced an immediate leadership shakeup, including a new chief executive, after booking a big hit to its profits last year. The company’s sole traded bond fell sharply, although the bonds of other lenders with stocks under pressure were holding up.
Thursday’s disclosures marked the latest drama for the Long Island, N.Y.-based bank, which has struggled with its exposure to an ailing commercial real-estate market. The bank operates Flagstar Bank in several states and picked up some of the leftover assets from the failed Signature Bank last year.
While the accounting issues are likely company-specific, NYCB’s loan issues have sparked concerns that other banks are also struggling with real-estate loans after the Federal Reserve’s interest-rate increases over the last two years.
The bank is especially exposed to real estate in New York City and rent controls there that have prevented landlords from imposing higher rents to combat the effects of higher interest rates.
Other regional banks with exposure to New York City were also lower early Friday, with Customers Bancorp Inc.
CUBI,
down 1.6%, Valley National Bancorp
VLY,
down 3.1%, Webster Financial Corp.
WBS,
down 1.3%, BankUnited Inc.
BKU,
down 2.7% and Axos Financial Inc.
AX,
down 1.7%. Citizens Financial Group Inc.
CFG,
was flat.
Additional regional banks that moved lower included Zions Bancorp
ZION,
which was down 1.3% and was third-biggest decliner among S&P 500 companies. Comerica Inc.
CMA,
was down 1.3%, Fifth Third Bancorp
FITB,
was down 0.7%, and both KeyCorp
KEY,
and Truist Financial Corp.
TFC,
were down about 1%.
The SPDR S&P Regional Banking ETF
KRE
was down 2% and has fallen 10% in the year to date, while the S&P 500
SPX
has gained 7% this year so far.
The following chart from data-solutions provider BondCliQ Media Services shows the performance of NYCB’s sole bond issue relative to competitors since February, and the sharp dip in price on Friday. The floating-rate bonds that mature in 2028 have fallen as the bank’s problems have emerged, while rivals have held up well. That signals that bondholders believe the troubles are likely isolated to NYCB.
Bonds have seen net buying over the last two weeks, another bullish signal.
The following chart shows two-week trade volume by customer type, namely customer buys, customer sells or dealer-to-dealer activity.
The maturity bucket shows that most of the outstanding bonds are five-year maturities.
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