Regional bank stocks are experiencing heightened volatility following the release of New York Community Bancorp (NYSE:NYCB)’s disappointing quarterly results, reigniting concerns about the sector’s structural challenges.
Investors are particularly scrutinizing the exposure of regional banks to the commercial real estate sector, which faces significant troubles due to declining market values linked to office space prices.
According to data from Trepp, an impressive $2.77 trillion of commercial real estate debt, representing half of all outstanding commercial real estate debt, is scheduled to mature between 2023 and 2027. Notably, nearly $500 billion of this debt is due in 2024 alone and will need to be refinanced.
The SPDR S&P Regional Banking ETF (NYSE:KRE), a key gauge for the sector, has fallen over 11% in the last two sessions, putting it on course for its worst two-day performance since March 13, 2023. At that time, regional banks fell in response to the failures of Silicon Valley Bank and Signature Bank, which triggered widespread panic across the industry.
As of 11 a.m. in New York on Thursday, New York Community Bancorp has seen a 46% decline in the last two sessions.
Chart: Regional Banks Under Pressure Again
Worst-Performing Regional Bank Stocks Thursday
| Bank name | Price | Weight In KRE ETF | 1-Day Return |
|---|---|---|---|
| New York Community Bancorp, Inc. | 5.59 | 2.60% | -13.52% |
| Metropolitan Bank Holding Corp. (NYSE:MCB) | 42.01 | 0.16 | -13.36% |
| Western Alliance Bancorporation (NYSE:WAL) | 57.00 | 4.06 | -10.88% |
| Valley National Bancorp (NYSE:VLY) | 8.64 | 1.27 | -10.19% |
| Pinnacle Financial Partners, Inc. (NYSE:PNFP) | 79.45 | 1.60 | -10.10% |
| First Foundation Inc. (NYSE:FFWM) | 8.61 | 0.23 | -9.61% |
Analysts Assess Regional Bank Risks
Bank of America trimmed New York Community Bancorp’s price target from $13 to $6.50 amid downward revisions to earnings and revenues for 2024, although it maintained a Buy rating on the stock.
“We don’t anticipate a quick rebound in the stock as the Street will need time to digest the significant change in earnings outlook,” BofA Global Research analyst Ebrahim Poonawala said in a note to clients.
Poonawala suggested the fourth quarter may serve as a “kitchen-sink” quarter, implying that investors will expect the earnings outlook to fully account for the severest impacts on credit,…
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