By Brian Swint
Regional banks were falling after New York Community Bancorp took a surprise charge in its fourth-quarter earnings.
The concern is that other regional lenders may also be experiencing problems with loans made on commercial real estate. Two years of rapidly rising interest rates have driven down property prices and made it harder for banks' clients to pay off loans.
Though the Federal Reserve started raising interest rates in March 2022, the impact on commercial property loans has been a slow-burn issue for banks. A year ago, regional banks were hurt by a different issue of a sudden drop in the value of government bonds. That led to the collapse of Silicon Valley Bank, First Republic Bank, and Signature Bank.
The SPDR S&P Regional Banking ETF fell 1.4% in Friday's premarket. Valley National retreated 2.4%, and Bank OZK slipped 0.7%. Citizens Financial Group stock fell 0.9%, while shares of Zions Bancorp were down 1.7%. Regions Financial stock lost 1.8%.
Many of NYCB's problems may be unique to the company. It focuses on real estate in New York City, where rent controls have stopped landlords from increasing income as much as they might have liked to cope with higher interest rates.
Treasury Secretary Janet Yellen said last month that "regional banks have concentrations of commercial real estate lending" and "office properties in some cities are of special concern because vacancy rates have increased." Yellen is chair of the Financial Stability Oversight Council.
Write to Brian Swint at brian.swint@barrons.com
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(END) Dow Jones Newswires
March 01, 2024 06:45 ET (11:45 GMT)
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