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What’s Behind New York Community Bancorp’s Very Bad Day
The Fed could've done without a flare-up in the heretofore dormant regional banking crisis ahead of Jerome Powell's press conference on Wednesday, when a record one-day decline in shares of New York Community Bancorp conjured uncomfortable memories of last year's turmoil among America's small- and mid-sized lenders.
The stock's rather remarkable collapse rekindled rate-cut bets for the March FOMC meeting. Following Tuesday's JOLTS release in the US, the market-implied odds of a move from the Fe
Thanks. That piece was worth the price of admission
Thanks for posting this. I’m not surprised since we were told on the QT about some huge markdowns of private real estate investments going on. All due to offices.
The move from scarcity to surplus in the multiunit space is pretty remarkable as well.
This is the slowly burning fuse to Wile E Coyote’s TnT. Stories proliferated on the topic last year then… crickets. This is a train wreck in slow motion. Time horizon and size of the problem are opaque, but it will only take 1 or 2 banks failing to clarify whether or not the fuse is still lit… BOOM!
Yikes. I bought NYCB right after the SIVB-triggered meltdown, got lucky when it took SBNY’s carcass, and took the quick gain, thinking the easy money was made. Then watched it go up up up, kicking myself for the premature exit. Sure it had more office exposure than I’d otherwise consider owning in a bank name, but surely management kitchen-sinked the provisions on the acquired assets, the better to boost earnings with later reversals? Oops, apparently not.
A bit of contagion over in Tokyo last night.
So many “analysts” gave the regional banks the all-clear designation when the crisis at SVB failed to trigger any more headlines in the next quarter.
NYCB multifamily loans include a lot of rent-controlled NYC apartments, which is an idiosyncratic risk.
yep. But the surplus I’m referring to is in the sun belt.
I think Sun Belt over-supply will fade in 2025, since new multifamily permits and AIA residential billings slumped so much in 2023.
https://fred.stlouisfed.org/graph/?g=1f8t7
https://www.aia.org/sites/default/files/2023-12/december-abi-infographic-part1.pdf
Could be. I was surprised by it. Though the WSJ recently had a piece about a surplus of single family homes in Texas.
The Sunbelt apartment REITs have been trending down for a year or more, due to rising rates and new supply growth slowing rent growth. With rates now declining and new supply decline a year away, they are bottoming. They should be able to pick up newly completed projects this year from developers unable to get permanent financing to replace their construction loans, so seems like 2025 should be a good year for the companies, suggesting 2024 should see the stocks come good.
Oversupply of SFR, that’s a new one for me – I’ll go find that article.
This NYT article outlines the unique issues facing NYC rent controlled apartment buildings.
https://www.bloomberg.com/news/features/2024-02-05/nyc-apartments-go-on-sale-for-50-off-due-to-tougher-rent-control?srnd=premium&sref=eCUg41rA
This is really interesting to me. I’m on some editorial boards of academic journals and I just reviewed a new case study about the passing of SBNY. Sadly, the case wasn’t very good. The author linked SB’s failure to that of SVB. They were clearly unrelated. The author then posited that the bank should have solved its “problem” by getting regulators to change. The author was not clear why that was an issue but thanks to this posting and comment thread I understand the issue. SB’s acquisition pushed NYCB entry into a bigger size category, raising its capital burden. Why didn’t NYCB see that coming when they looked at SB’s portfolio and adjust for it in advance? That seems like a very silly oversight. Analysts didn’t seem to catch that little nuance ahead of time, either. Tsk, tsk.