NYCB stock rout prompts US bank regulators to conduct health checks (updated)

WaFd

20/02/2024 15:06

(Adds stock price)
    By Nupur Anand, Pete Schroeder and Matt Tracy
       NEW YORK/WASHINGTON, Feb 20 (Reuters) - U.S. banking
regulators have been asking regional lenders whether they faced
any fallout from the problems at New York Community Bancorp
 NYCB.O , several sources said, in a sign that worries about the
health of the sector persist. 
    Two banking executives, a legal source and an industry
source, said banks had calls with regulators. Those included the
Office of the Comptroller of the Currency and the Federal
Deposit Insurance Corp, as well as state banking bodies, the day
of and shortly after NYCB posted disappointing earnings and cut
its dividend on Jan. 31, sources said.
    The conversations included regulators inquiring about
liquidity at the banks and whether they had seen any impact on
deposit flows or worries from customers, the bankers said.   
    The executives said they had not seen any unusual activity,
with one describing it as an exercise to confirm what regulators
already knew.
    The conversations are an indication of how concerned
regulators remain about smaller banks, after the failure of
Silicon Valley Bank  SIVBV.UL  and other mid-size banks last
year sparked fears about the health of regional lenders. 
    NYCB posted a surprise loss in late January and a $552
million provision for credit losses, with the major share of the
provisions allocated to its commercial real estate (CRE)
portfolio.
    Small banks account for nearly 70% of all CRE loans
outstanding, according to research from Apollo. Pressure on CRE
loans have increased with vacancies in several office buildings
continuing since the pandemic.
    Valley National Bancorp  VLV.O , Axos Bank, WaFd  WAFD.O 
and Bank OZK  OZK.O  are some of the other lenders that have a
high CRE concentration, according to real estate data provider
Trepp.
    WaFd Bank said its CRE concentration level was "clearly
something the regulators focused on in our recent merger
application of Luther Burbank Savings," adding that it received
approval of the acquisition on Jan. 30.
        "Valley has been a relationship commercial real estate
lender that has been consistently regulated by the OCC for many
decades," Ira Robbins, CEO of Valley National Bank, said in a
statement to Reuters. "We remain comfortable with our diverse
and granular commercial real estate portfolio. As always, we
value and benefit from regular dialogue with our regulators."
    The other banks did not respond to email requests seeking
comment. Spokespeople for the FDIC and OCC declined to comment. 
    Some of the regulatory conversations included questioning
the banks about their liquidity and capital positions and ruling
out any likely imminent areas of stress, said the legal source
who works with regional banks.
    The source described those conversations as triggered after
NYCB's earnings, adding that the heightened monitoring includes
conversations around every area of operation to ensure that
banks are resilient.
    NYCB stock has lost over 50% of its value since January and
was down by over 3% in trade on Tuesday.

 (Reporting by Nupur Anand and Paritosh Bansal in New York, Matt
Tracy and Pete Schroeder in Washington; Editing by Megan Davies
and Leslie Adler)
 ((Nupur.Anand@thomsonreuters.com; +1 646 240 2975;))