NYCB crisis is not a systematic issue
Since the $New York Community(NYCB)$ isclosed its financial report last week, showing a loss in Q4, the withdrawal of $552 million in loan loss reserves, and a reduction in dividends, its stock price has plummeted by 60%. Investors are worried that it may become the second $SVB Financial Group(SIVBQ)$ . However, the risk in commercial real estate is still manageable.
On January 31, the company announced a $100 billion asset threshold, which increased costs, and incurred expenses related to two potential problem loans, causing the stock price to drop by 37% on that day.
Prior to this, the bank had discussions with the Office of the Comptroller of the Currency (OCC) before conducting impairments and reducing dividends. On the same day, the company's risk manager resigned shortly before the announcement of fourth-quarter performance, which was an undisclosed development.
However, the recent issues at New York Community Bank are not systemic and will not have a negative impact on the broader economy. The problems are mainly limited to office real estate, involving only certain community and regional banks, and are unrelated to major banks.
It is worth noting that during the regional bank crisis in 2023, community banks took over the bankrupt Signature Bank. Currently, the scale of office real estate is not large enough to have a truly negative impact on the economy, unless consumer credit quality begins to deteriorate significantly, in which case it is estimated that even an overnight rate cut by the Federal Reserve would not be enough.
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