Powell's congressional hearing tonight, next Mon March 11 the BTFP expires, and then we have FOMC meeting on March 19-20
The regional bank – which bought parts of bankrupt Signature Bank last year – shocked investors when it reported 2023 earnings. It recorded a massive increase in its reserve for loan losses that was 10 times higher than analysts expected.
The bank said it was building its reserves to "address office sector weakness." The $552 million charge wiped out all of the bank's profits.
This is only the beginning. The charge was just a tiny portion of NYCB's commercial real estate portfolio, which totals more than $13 billion.
The continued sell-off is emblematic of growing fears and realities for regional banks that may be exposed to defaults. Nearly $1 trillion in loans come due this year, including roughly $500 billion in commercial real estate loans. We said last month that 'we could see more trouble for bank stocks'...
And that's still true.
The tale with NYCB is essentially a shade of the regional-banking crisis that unfolded one year ago this month. This one has more to do with unrealized losses tied to commercial real estate rather than massive unrealized bond losses in general.
I do find it notable that the "rescue" operation that the Fed came up with about a year ago to mute panic in regional banks is about to expire as well. As we wrote last month...
After Silicon Valley Bank and Signature Bank failed last March, the Federal Reserve launched the Bank Term Funding Program as essentially a liquidity pool for banks at low rates. It's scheduled to stop making new loans on March 11...
In the meantime, the Fed also raised the interest rate on the program, which was effectively ending an easy way for banks to make money. At the very least, more talk about the lapse around this program could stoke volatility in the banking sector – again.
We said last month that 'we could see more trouble for bank stocks'...
