U.S. regional banking shares tumble for second straight day

A sell-off in shares of U.S. regional banks continued on Thursday, adding to losses from a day earlier when New York Community Bancorp, shocked the market as it reported pain in its commercial real estate portfolio, renewing fears about the industry’s health.

The KBW Regional Banking Index slipped 4.8% after seeing its biggest single-day decline since the collapse of Signature Bank in March last year. It was on course for its biggest two-day percentage drop since June 2020.

NYCB shares lost another 13.4% of their value and were last trading at $5.60. The stock experienced a record single-day drop of 37.6% on Wednesday, according to LSEG.

The frenzied selling in banking shares has rekindled fears about regional lenders, even as many analysts and investors said the problems at NYCB were mostly unique.

“Financial institutions need to urgently reassess their portfolios and explore alternative financing options – or risk being hit by a new crisis,” said Martin Rauchenwald, partner at management consulting firm Arthur D. Little.

NYCB’s purchase of Signature Bank, along with its 2022 acquisition of Flagstar Bank, pushed its assets above a $100 billion regulatory threshold that is subject to stricter capital and liquidity requirements.

“We believe NYCB has several idiosyncratic characteristics, but the result and reaction are reminders of risks that remain in the regional banking space,” wrote Jefferies analysts.

NYCB sees net interest income (NII) in 2024 between $2.8 billion and $2.9 billion, the midpoint of which is below the $2.88 billion analysts were expecting, according to LSEG data.

The bank updated its earnings presentation later on Wednesday to include its NII forecast, after not giving a clear number earlier, in the day despite repeated requests by JPMorgan analyst Steven Alexopoulos on its post-earnings call.

Alexopoulos maintained…