© Reuters. FILE PHOTO: A screen displays the trading information for New York Community Bancorp on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., January 31, 2024. REUTERS/Brendan McDermid/File Photo
By Niket Nishant
(Reuters) -U.S. regional bank stocks on Friday recovered slightly from a brutal two-day sell-off sparked by investor concerns that New York Community Bancorp (NYSE:)’s dismal earnings signaled broader problems for the sector.
The KBW Regional Banking Index gained 0.6% after initially dipping early in the trading session. If it holds the gains, the index will post its first positive day after three consecutive sessions of losses.
NYCB shares, which fell nearly 45% over the last two sessions after the lender slashed its dividend and posted a surprise loss on commercial real estate (CRE) loans, were up more than 7% on Friday.
“We believe the reaction is overdone on a fundamental basis… and remain constructive long term on the regional banks,” Citigroup analyst Keith Horowitz said.
Shares of Valley National Bancorp (NASDAQ:), Citizens Financial (NYSE:) Group and some other mid-size banks also posted slim gains.
“We believe as the market continues to appreciate the value enhancing actions NYCB has taken the share price will recover,” a NYCB spokesperson said in an email on Thursday afternoon.
CRE FEARS
Regional bank CRE exposure has concerned investors for months, with Morgan Stanley analysts saying in a note that CRE credit is expected to continue deteriorating.
NYCB on Wednesday boosted its provisions for credit losses by 345%, part of which was allocated to its CRE portfolio, re-igniting worries over defaults as high interest rates and remote work dampen office demand.
“The shift in investor sentiment reflects a risk that the market was ignoring over the past 1.5 months and has now come back into focus,” Morgan Stanley said.
BofA analysts said the sell-off in NYCB’s stock could hit investor confidence.
“It could potentially cause investors to take a wait-and-watch approach until additional visibility emerges on macro, Fed policy and earnings per share outlooks.”
Meanwhile, shares of Japan’s Aozora Bank slumped to a three-year low in Tokyo after it took a huge loan-loss provision against U.S. office loans.
