The U.S. banking industry has exploded again!
Before the U.S. stock market on March 1, the stock price of the New York Community Bank once exceeded 32%. On the news side, the bank's latest documents show that due to the discovery of problems in the loan review process, the New York Community Bank wrote down 2.4 billion US dollars (about 19 billion yuan) of goodwill, resulting in a fourth-quarter loss revised to 27100 million US dollars (about 21.2 billion yuan), an increase of more than 10 times compared with the originally disclosed loss.
New York Community Bank, a commercial real estate lender headquartered in New York State, USA, at the end of January this year, due to the loss of commercial real estate loans, the financial report disclosed by the New York Community Bank has suffered a thunderstorm. According to the financial report, the loss in the fourth quarter of 2023 was 2$5.2 billion, while analysts had expected a profit of 20.6 billion US dollars.
New York Community Banks are in a state of turmoil, which has also rekindled concerns about regional banks in the United States. The Federal Reserve's previously released annual stress testing guidance specifically emphasizes requiring banks to identify commercial real estate risks. Separately, Michael Barr, the Federal Reserve's vice chairman for banking supervision, has warned that regulators are "keeping a close eye on" risks in commercial real estate lending and have begun to downgrade the regulatory ratings of financially stressed banks.
According to the Federal Reserve, as of January 2024, the size of commercial real estate loans in the U.S. banking sector is as high as 29 trillion US dollars (about 22 yuan.)7 trillion yuan), of which the commercial real estate loans of small and medium-sized banks accounted for 69% of the industry.
Sudden thunder. Before the U.S. stock market on March 1, the stock price of the New York Community Bank suddenly fell by more than 32%.
On the news side, the latest documents released by the New York Community Bank show that due to the discovery of problems in the loan review process, the New York Community Bank wrote down 2.4 billion US dollars (about 19 billion yuan) of goodwill, resulting in a fourth-quarter loss revised to 27100 million US dollars (about 21.2 billion yuan), an increase of more than 10 times compared with the originally disclosed loss.
In its latest filing, the bank also said management "identified material deficiencies in the company's internal controls related to internal loan reviews due to inadequate oversight, risk assessment and monitoring activities."
The New York Community Bank urgently took steps to delay the filing of its annual report in order to "complete the work related to the assessment and planning to remediate material deficiencies."
At the same time, on Thursday local time, the New York Community Bank urgently announced that it had appointed a new leadership to deal with the current turbulent situation. The bank will appoint Alessandro Dinello as president and CEO. The current CEO, Thomas Cangemi, has informed the company on February 23 that he has decided to resign from these positions but will remain on the board.
New York Community Bank also announced other board changes: Marshall Lux, who has served as an independent director since 2022, has been appointed lead director, former lead director Hanif"wally"Dahya has stepped down from the Board of Directors.
stormy New York Community Bank.
New York Community Banks are in a state of turmoil, which has also rekindled concerns about regional banks in the United States.
At the end of January this year, due to the loss of commercial real estate loans, the financial report disclosed by the New York Community Bank also suffered a thunderstorm. According to the financial report, the bank lost 2$5.2 billion, while analysts had expected a profit of 20.6 billion US dollars. Loss per share was 036 US dollars, a year-on-year change from profit to loss. At the same time, the bank also disclosed 5Provision for loan losses of $5.2 billion and a reduction in dividend to 5 cents per share from 17 cents.
On the day of the earnings announcement, the share price of the New York Community Bank exceeded 37%, a new high since its listing in November 1993, far exceeding the bank's largest decline during the global financial crisis in 2008, and since January 31 this year, it has accumulated nearly 60% in eight trading days.
After the share price**, shareholders said in a class action lawsuit filed in federal court in Brooklyn that the regional bank had deceived them because it had not disclosed that it would set aside more money for credit losses and cut its dividend by 71% to prop up its balance sheet.
Since early February, more than a dozen brokerages have lowered their price targets on the bank**, and international rating agency Moody's has also downgraded all long-term issuers and some short-term issuers of New York Community Bank to "junk rating" and warned of the possibility of further downgrades.
Judging from the financial report data, one of the main reasons for the loss of the New York community bank in the fourth quarter of last year was that two loans related to commercial real estate became bad debts, resulting in as high as 1$8.5 billion in losses. During the reporting period, the bank's loan loss provision (also known as loan loss provision) amounted to 5$5.2 billion, more than 10 times higher than analysts**'s $45 million, and well above the previous quarter's $62 million.
The Federal Reserve warned
According to data disclosed by the Federal Reserve, as of January 2024, the size of commercial real estate loans in the U.S. banking sector is as high as 29 trillion US dollars (about 22 yuan.)7 trillion yuan), of which the commercial real estate loans of small and medium-sized banks accounted for 69% of the industry. Commercial real estate loans account for about 13% of all bank assets, of which 30% of the total assets of small and medium-sized banks, and small and medium-sized banks have become a vulnerable link in the financial system under the risk of commercial real estate.
According to Trepp, a commercial real estate data provider, banks will have a combined total of about $560 billion of commercial real estate debt due by the end of 2025, accounting for more than half of the total real estate debt due during the same period.
Bloomberg previously reported that the Federal Reserve will test the ability of banks to withstand broader potential shocks this year after the collapse of a number of regional banks in the United States, and this stress test is the first annual test since the collapse of Silicon Valley Bank and Signature Bank in the United States in March last year, and will cover 32 banks with assets as low as $100 billion.
In its annual stress testing guidance, the Federal Reserve specifically emphasizes that banks are required to identify commercial real estate risks and pay attention to the measures they are taking to mitigate potential losses and whether they have sufficient reserves and capital to cope with loan losses.
At the end of 2023, more than 20 banks in the U.S. held commercial real estate loans that regulators deemed to require strict supervision. According to the analysis, this signal suggests that more banks may face regulatory pressure to increase reserves.
The Federal Reserve, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency have publicly warned the banking sector to carefully evaluate large loans to office buildings, retail storefronts and other commercial properties. Regulators said they would keep a close eye on banks with commercial real estate loans worth more than three times their total capital.
Separately, Michael Barr, the Fed's vice chairman for banking supervision, warned in a speech at Columbia University in New York that regulators are "keeping a close eye on" risks in commercial real estate loans and have begun to downgrade the regulatory ratings of financially stressed banks.
*: Brokerage China.
Editor: Kobayashi.