Regional bank stocks are looking to stabilize early on Friday following a two-day selloff triggered by New York Community Bancorp’s unexpected loss and drastic reserve increase.
NYCB Takes a Hit
On Wednesday, NYCB announced that it had added $552 million to its loan-loss provision, mainly related to real estate loans, and slashed its dividend. This move put significant pressure on the sector, resulting in a steep decline in NYCB stock.
A Brief Respite
After hitting a 24-year low on Thursday, NYCB stock showed signs of recovery on Friday, rising by 2.3% early in the day. While this brings temporary relief, investors and analysts remain cautious given last year’s regional bank crisis.
Office Real Estate Loans Under Scrutiny
J.P. Morgan’s Kabir Caprihan stated on Thursday that he didn’t believe this situation would be a repeat of 2023. However, he did note that reserves on office real estate loans were lower at two banks compared to their peers. Zions Bancorp and M&T Bank had loss reserves of 3.8% and 4.4%, respectively, compared to NYCB’s 8% after the recent accrual.
Persistent Selloff
Despite initial signs of a rebound, NYCB shares continued to decline on Thursday, closing 11% lower at $5.75—their lowest level since 2000. The KBW Regional Banking Index also fell by 2.3%, following a 6% decline in the previous session. Western Alliance Bancorp experienced one of the sharpest declines, slipping by 7.5%, while Zions Bancorp and M&T Bank both dropped by 6% and 5%, respectively.
Seeking Stability
Regional bank stocks, including NYCB, Zions Bancorp, and M&T Bank, are expected to seek stability in the coming days after the recent selloff. The market will closely monitor the situation as investors and analysts assess the impact on the sector.