Banking crisis déjà vu?
The sell-off in regional bank stocks looks set to worsen on Wednesday, after Moody’s cut New York Community Bancorp’s credit rating to junk status.
Fears are now rising among investors over the United States’ distressed commercial real estate sector. This comes as a crucial lifeline created during last year’s banking crisis is set to expire.
N.Y.C.B.’s shares plunged as much as 15 percent in premarket trading after the downgrade, before rebounding. The stock has plummeted roughly 60 percent in the past week after the lender reported dismal results, especially stemming from its exposure to souring commercial real estate loans.
Last year, N.Y.C.B. won the bidding for assets tied to Signature Bank, which failed shortly after the demise of Silicon Valley Bank. That pushed its assets above $100 billion, putting it into a new regulatory category, and subjecting it to more stringent capital requirements.
Bank jitters are spreading. The KBW Nasdaq Regional Banking Index, a collection of midsize bank stocks, has fallen nearly 12 percent in the past week as investors worry about lenders’ exposure to commercial real estate loan portfolios.
Plunging office occupancy rates and high interest rates are a big reason. The shift in working practices after the height of the coronavirus pandemic has roiled the commercial real estate market and lenders could face a “maturity wall” of as much as $1.5 trillion in commercial real estate loans set to come this year and next. (U.S. regional banks provide the bulk of such loans, putting them at particular risk.)
