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Regional banks
Posted on 2/13/24 at 7:41 am
Posted on 2/13/24 at 7:41 am
I’m in several regional bank stocks. All are up between 5-25% except NYCB which is down 51%. What are people thinking about this sector? Time to sell or hold onto the dividend and expect that any collapse will be followed by a rally? Just wondering how others are playing this.
6
Posted on 2/13/24 at 9:15 am to Drizzt
My biggest evaluating factor would be seeing how much they have tied up in CRE, especially in certain vulnerable cities. That’s probably the most toxic asset in the market atm.
ETA: I just looked and CRE is exactly why NYCB is cratering atm. They have CRE holdings as a proportion of their total risk-based capital at 468% (and naturally that will be centered around NYC). They’re also a major lender to rent-stabilized landlords in NYC. The default rate on New York’s rent-stabilized housing has historically been low, but has risen from 0.32% in April 2020 to 4.93% in December 2023.
You should bail on that one at the least. It’s not going to get better for them.
ETA: I just looked and CRE is exactly why NYCB is cratering atm. They have CRE holdings as a proportion of their total risk-based capital at 468% (and naturally that will be centered around NYC). They’re also a major lender to rent-stabilized landlords in NYC. The default rate on New York’s rent-stabilized housing has historically been low, but has risen from 0.32% in April 2020 to 4.93% in December 2023.
You should bail on that one at the least. It’s not going to get better for them.
This post was edited on 2/13/24 at 9:35 am
Posted on 2/13/24 at 9:18 am to Drizzt
regional / small banks have large real estate concentrations. a large majority of that portfolio is maturing this year and next with huge negative consequences.
and, if you look at their net interest margins, continuing to get squeezed.
fundamentally, a sector with many more negative characteristics than positive ones.
and, if you look at their net interest margins, continuing to get squeezed.
fundamentally, a sector with many more negative characteristics than positive ones.
Posted on 2/13/24 at 9:22 am to Drizzt
I've ridden RF and TFC up from the bottom last fall. Do not know how exposed either are in CRE and am a little nervous right now.
Posted on 2/13/24 at 12:45 pm to Drizzt
I still hold the belief that we will have serious problems in the sector.
I can’t pretend to predict when, but I believe it will happen.
I can’t pretend to predict when, but I believe it will happen.
This post was edited on 2/15/24 at 6:29 am
Posted on 2/13/24 at 8:46 pm to Hayekian serf
I don’t doubt these stocks will take a hit. My question is more are we thinking total collapse or prices drop then come back with the inevitable bailout? If it’s the latter, I’ll hold them.
Posted on 2/14/24 at 9:12 am to Drizzt
quote:
My question is more are we thinking total collapse or prices drop then come back with the inevitable bailout? If it’s the latter, I’ll hold them.
No one can know - it’s more of a wild guess. Each institution has its own issues. Some issues, especially those related to CRE, are more common. But the effect won’t necessarily be the same for all.
I have some ETF shares that cover the sector, but no individual equity holdings, as I don’t care for the risk/reward profile. I would prefer to take my risks with a (small) broad holding. The reason goes to what you mentioned: with a total collapse, as a holder of common, I’d definitely be wiped out. And with a severe drop and (“inevitable”???) bailout, common shares would likely be wiped out. So if I was expecting either scenario to have more than a 50% probability, I’d either stay away or be prepared to buy downside protection.
BTW, I’m assuming here that you’re referring to common shares and not preferred shares or secured debt holdings.
Posted on 2/14/24 at 10:17 am to Drizzt
quote:
My question is more are we thinking total collapse or prices drop then come back with the inevitable bailout? If it’s the latter, I’ll hold them.
Why not take your current winnings and put them somewhere else while the space is so unstable? They’ll still be selling the stock after such a correction. You won’t be locked out.
That way you can capture some gains in other markets while this sector languishes.
Posted on 2/14/24 at 10:20 am to Drizzt
quote:
I have some ETF shares that cover the sector, but no individual equity holdings
Me as well. I started buying ETF, IAT, in late March through May after the big regional bank melt down in the first quarter of 2023. Up 10% on avg cost basis. Current yield is 3.7% with an expense of 0.4%. I will put in stop loss orders as shares become long term.
Posted on 2/14/24 at 5:14 pm to Drizzt
quote:For the regionals and super-regionals, their CRE difficulties are finally coming to the fore. They got duration relief from the Fed last year, but now the issues are actually on the credit side.
Regional banks
I’m in several regional bank stocks. All are up between 5-25% except NYCB which is down 51%. What are people thinking about this sector? Time to sell or hold onto the dividend and expect that any collapse will be followed by a rally? Just wondering how others are playing this.
I don't predict a big blow up, but it seems zombie-ish for the foreseeable future. They just have way too much multi-family exposure.
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