Quotes: Regional bank selloff continues as New York Community Bancorp slumps

(Reuters) - A sell-off in shares of U.S. regional banks continued on Thursday, adding to losses from a day earlier when a surprise loss and a 70% divided cut from New York Community Bancorp renewed fears about the health of the industry.

The KBW Regional Banking Index fell 1.8%after seeing its biggest single-day decline since the collapse of Signature Bank in March last year. New York Community Bancorp was last down 8.4%.

COMMENTS:

SETH HICKLE, DERIVATIVES PORTFOLIO MANAGER, INNOVATIVE PORTFOLIOS

"I do think not every regional bank is created equal and some are being unjustly punished. Eventually after the dust settles and the winners emerge, I will reevaluate and look for a trade if there is one to be found. From my perspective any increase in exposure to regional banks would be speculative. After scanning the options activity of several regional banks, it appears others may be thinking like myself and avoiding the area. I didn’t notice anything unusually interesting.”

JAAP DE VRIES, TRADER, OPTIVER, CHICAGO

“We're seeing renewed investor concern over commercial real estate exposure after Aozora Bank's results overnight. Those fears seemed to have moved to the backburner after most regional banks reported last week. Demand for protection is picking up in the SPDR S&P Regional Banking ETF (KRE), with investors showing renewed interest in buying KRE puts expiring in May with a strike price of 46.”

MACRAE SYKES, PORTFOLIO MANAGER, GABELLI FUNDS

"NYCB is an idiosyncratic component that has weighed on other banks. When (Federal Reserve chair Jerome) Powell spoke yesterday and indicated that there will be no March lowering of rates, the smaller regional banks sold off on that notion. That shouldn't have been a surprise but clearly there were investors in there hoping that would have been on the table. The delay in the Fed easing of rates impacted the overall sentiment in banks."

"And he said that smaller banks are "being impacted by higher deposit costs. If the Fed lowered rates that would help them."

"You've a continuation of both factors, a more hawkish Fed and worries about commercial real estate impacting sentiment on the banks today."

STEVE SOSNICK, CHIEF STRATEGIST, INTERACTIVE BROKERS

“After the events of last March it was very much a shoot-first, ask-questions-later type of response, and we're seeing it persist today.”

“I don't love the fact that [the selloff] is continuing today, in spite of a broader market rally, and also I think it's interesting that the big banks were not immune.”

“I think it's premature to worry too much. While New York Community is somewhat suffering the effects of having acquired a lot of the assets of Signature Bank, JPMorgan isn't exactly suffering from their acquisitions.”

MICHAEL FARR, CHIEF EXECUTIVE OF INVESTMENT ADVISORY FIRM FARR, MILLER & WASHINGTON

“I don’t see a systemic problem here. I think this is more idiosyncratic.”

“They made a few acquisitions, got themselves over a $100 billion and had to meet a higher regulatory standard.”

“I think folks are a little quick to ring alarm bells.”

“If it proves to be more widespread it could force the Fed’s hand sooner, but I don’t see the evidence to support that right now.”

“If I saw in these earnings reports reserves being added to for fears about non-performing real estate loans that are material, then I would be more concerned.”

MICHAEL REYNOLDS, VICE PRESIDENT, INVESTMENT STRATEGY, AT GLENMEDE

"Generally, he banks that have the biggest commercial real estate exposure on their loan books have to be bracing for some non-performance on those loans … We’re watching this space (regional banks) closely, we’re looking for signs of stress broadening out and we don’t see it yet, but as we saw in March last year, these things can spread quickly so it’s something we’re watching every day.

"It’s psychological, too, one bank comes out with a bad report and consumers look at their banks and wonder if they need to pull deposits and if a bank loses deposits, it’s not going to work out well for them. That’s just how the banking system works, it’s very sentiment driven."

MATT PESTRONK, CO-FOUNDER AND PRESIDENT, REAL ESTATE DEVELOPER POST BROTHERS

"I think the stock is oversold and they are a pretty smart lender with a proven history over time of low loan losses. People want to be very negative on banks. Banks are probably closer to health than they have been. Rates are going to come down and that will ease pressure on floating rate loans and their borrowers. Therefore, loan losses will be less due to high floating rates causing borrowers to default. Everyone agrees on that. It is a question of when.

"There is no bank that I am aware of with billions and billions of dollars of exposure to office buildings that is significant relative to their regulatory capital. Their regulatory regime changed as the bank went over $100bb. They have a simple and time tested model that is different from other banks over $100bb with much more complicated models such as Citibank and other global financial institutions. They probably over-reserved for losses associated with those loans."

MARTIN RAUCHENWALD, PARTNER, LEADER OF FINANCIAL SERVICES PRACTICE, ARTHUR D LITTLE

“Contractionary monetary policy, economic slowdowns, and an ongoing high interest environment have created real danger for financial institutions, with the increasing probability of mortgage default threatening another period of turmoil. Financial institutions need to urgently reassess their portfolios and explore alternative financing options – or risk being hit by a new crisis.”

DAVID WAGNER, PORTFOLIO MANAGER, APTUS CAPITAL ADVISORS

"It was definitely an unwelcome reminder of what happened in March '23. The nexus of regional bank stress last year stemmed, essentially, from the mismanagement of interest rate exposure that caused massive mark-to-market losses - that's not what is happening here. NYCB declined for several company-specific reasons. First, the acquisition of Signature Bank made NYCB large enough that it was subject to significantly higher capital ratios and that was the primary factor behind the dividend cut and the dramatic increase of the loan loss provision from $45 million to $552 million.

"I believe that this is an idiosyncratic issue.

"If there is anything more “systemic” in the results yesterday that needs to be watched, it’s that the bank said it thinks credit deterioration could occur in the office and multi-family property markets (commercial real estate). But that sentiment hasn’t been echoed by any of NYCB’s peers such as Regions Financial or KeyCorp, so this may be a function of bank-specific poor loans. "

(Compiled by the Global Finance & Markets Breaking News team)