Benzinga - by Piero Cingari, Benzinga Staff Writer.
Shares of New York Community Bancorp Inc. (NYSE:NYCB) experienced a significant drop, plummeting 22.15% during Tuesday’s trading session to reach lows not seen since April 1997.
The bank has become a focal point of investor concern after losing 38% of its value following the announcement of disappointing quarterly results last week, which revealed a loss contrary to analyst expectations of a profit.
Over the last week, NYCB’s market cap as more than halved from $7.45 billion to $3.16 billion.
Following the regional banking crisis in March 2023, New York Community Bancorp acquired the troubled Signature Bank, expanding its assets to above $100 billion. This growth has placed the bank under more stringent regulatory and capital standards, reflecting its increased size and operational scope.
Chart: NYCB Falls To Levels Last Seen In April 1997
NYCB’s Achilles’ Heel
A report by Goldman Sachs highlighted NYCB’s significant exposure to the commercial real estate loan market, with CRE loans constituting about 56% of the bank’s total loans.NYCB’s decision to cut its dividend and increase cash reserves stems from pressures from a leading U.S. regulatory body, according to a Monday Bloomberg report.
NYCB has embarked on a strategy to bolster its reserves, setting aside $552 million for potential loan losses, a figure that far exceeds analyst expectations. This decision led to a drastic 70% cut in quarterly dividends, highlighting the bank’s cautious approach at this market juncture.
Read also: Regional Banks Suffer Worst 2-Day Slump Since March 2023 Crisis As Investors Scrutinize Commercial Real Estate Risks
Bank Of America Remains Bullish, Yellen Issues Warning On CRE Loans
On Monday, Bank of America Global Research said that “while there is clearly pressure on [NYCB’s] CRE borrowers, the fourth quarter marked a confluence of events that led to a worse than expected outcome.”The bank’s rent-regulated portfolio boasts a 97% weighted average occupancy rate, and a significant portion of its office portfolio is located in Manhattan, indicating some underlying strengths.
Bank of America Global Research maintains a Buy rating on NYCB, with a price target of $8.50, which is nearly double its Tuesday price.
Speaking to the House Financial Services Committee on Tuesday, Treasury Secretary Janet Yellen expressed concerns about the commercial real estate sector and the exposure risks for certain institutions.
“I’m concerned. I believe it’s manageable, although there may be some institutions that are quite stressed by this problem,” Yellen said.
The SPDR S&P Regional Banking ETF (NYSE:KRE) lost 1.26% to close at $46.97 Tuesday, the worst daily close since Dec. 1, 2023. New York Community Bank lost 22.2%, closing at $4.20, its lowest close since April 1997.
Now read: EXCLUSIVE: Regional Banks A Buying Opportunity Amid ‘Ridiculously Cheap Valuations,’ Veteran Value Investor Says
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