New York Community Bancorp Inc. Faces Setback
Regional bank stocks took a hit early Friday, with New York Community Bancorp Inc. (NYCB) leading the decline. The company announced the discovery of “material weaknesses” in its accounting, resulting in a significant drop of 25% in its stock price. To address the issue, NYCB implemented a leadership shakeup, appointing a new CEO after experiencing profit losses last year.
Real Estate Exposure Concerns
The Long Island-based bank has been struggling with its exposure to the troubled commercial real estate market. Operating Flagstar Bank in multiple states, NYCB acquired assets from the defunct Signature Bank, further complicating its financial position. This has raised concerns about other banks facing similar challenges, particularly in real estate lending following interest rate hikes by the Federal Reserve.
Impact on Other Regional Banks
Apart from NYCB, other regional banks with ties to New York City saw a decline in stock prices on Friday. Customers Bancorp (CUBI), Valley National Bancorp (VLY), Webster Financial Corp. (WBS), Bank United Inc. (BKU), and Citizens Financial Group Inc. (CFG) all experienced decreases. Axos Financial Inc. (AX) had yet to start trading.
Broader Impact on Regional Bank Sector
The troubles faced by NYCB reverberated across the regional banking sector, with Zions Bancorp (ZION), Comerica Inc. (CMA), Fifth Third Bancorp (FITB), KeyCorp, and Truist Financial Corp. (TFC) all seeing declines. Regional banks accounted for a significant portion of the top decliners in the S&P 500 index. The SPDR S&P Regional Banking ETF (KRE) fell by 1.2%.