Source: Zhitong Finance

Wednesday, subject to$New York Community Bancorp (NYCB.US)$Stock prices plummeted by 37.67%, and US regional bank stocks generally fell. Previously, the bank cut dividends and unexpectedly lost money, which once again raised concerns about the health of similar banks.

According to the data,$KBW Nasdaq Bank Index (.BKX.US)$It closed down 6% on Wednesday, the biggest one-day decline since March 13 last year.$Valley National Bancorp (VLY.US)$It closed down more than 7%,$Citizens Financial Services (CZFS.US)$und$Regions Financial (RF.US)$Both fell by more than 4%.

In March of last year,$SVB Financial (SIVBQ.US)$The collapse sparked a panic among savers and led to$Signature Bank (SBNY.US)$It all went bankrupt and the entire banking industry was in turmoil.

Although banking deposits have stabilized since then, some investors said Wednesday's sell-off highlighted continuing concerns about the health of regional banks, including that the cost of keeping deposits would squeeze net interest income.

Brian Mulberry, client portfolio manager at Zacks Investment Management, said: “Overall, the industry is more vulnerable to emotional trading as savers may feel a collapse is imminent. But for many banks, higher interest rates have been affecting earnings and net interest income.”

This sell-off also seems to have caught the market off guard.

Trade Alert data shows that SPDR S&P Regional Bank ETF-backed options traders have always been bullish, especially in the short term.

However, on Wednesday, these options traded four times faster than usual, as investors expected the outlook to be even bleaker. Put options have more trades than call options, at a ratio of 3:1.

Steve Sosnick, chief strategist at Yingtou Securities, said: “Many traders think the warning we see from New York Community Bank is like a cockroach — if you see one, there must be more cockroaches hiding in places you can't see.”

On Wednesday, the Federal Reserve kept interest rates unchanged, increasing investors' unease. High interest rates aimed at curbing inflation are dragging down regional banks' loan profits and the value of the securities they hold.

Mulberry said, “The market is also repricing the first rate cut from March to May. In the face of weak demand for loans, [banks] are once again providing interest of 5% or more for 5 months.”

However, other analysts and investors believe that New York Community Bank's problems are mainly unique to its balance sheet, and bank stocks have not faced the same pressure as in March of last year.

David Smith, an analyst at Autonomous Research Bank, said, “I don't think what we saw in the regional banking industry in March of last year will happen now.”

Regulatory threshold

New York Community Bank's stock price plummeted 46% at the beginning of the Wednesday session, but then the decline narrowed.

The bank bought part of Signature Bank's assets last year, saying it would cut dividends by 70% and increase capital to supplement its balance sheet.

The acquisition of Signature Bank, along with its acquisition of Flagstar Bank in 2022, brought New York Community Bank's balance sheet above the $100 billion regulatory threshold, which is limited by more stringent capital and liquidity requirements. As of December of last year, the bank's assets were $116.3 billion.

Thomas Cangemi, CEO of Community Bank of New York, said in a statement: “Thanks to the Signature transaction, we have crossed this important threshold faster than expected.”

Jefferies analyst Ken Usdin said in a research report that breaking through the $100 billion threshold “reminds banks to be prepared.” Usdin pointed out that currently it is still below this threshold$Comerica (CMA.US)$und$Zions Bancorp (ZION.US)$“Strict infrastructure construction that has passed stress tests and other requirements”.

Analysts at Community Bank of New York also seemed caught off guard and were disappointed that the details provided by the bank's management, including net interest income forecasts, were insufficient.

New York Community Bank's adjusted loss for the fourth quarter reached $185 million due to its credit loss provision of up to $552 million. Most of these provisions have been allocated to its commercial real estate portfolio, which, like many banks, has been under pressure due to continued vacant offices due to the pandemic.

Edward Al Hussaini, senior interest rate and foreign exchange analyst at Columbia Threadneedle Investments, said, “This is really a mess for shareholders, but the good news is that there are no spillover effects, and the impact is relatively small.”