Bitcoin (BTC) Price Firm at $43,000, US Banks in Crisis-Like Situation

NYCB’s share price has tanked 40% within two days amid strong stress on its real-estate portfolio causing investor panic.

The Bitcoin price continues to hold the guard at $43,000 gaining over 2.2% on February 1. The Bitcoin community still shows strength despite growing concerns about the overall health of the US banking industry.

This is because spot Bitcoin ETFs are attracting strong inflows even after 20 days of launch. The trading volumes for spot Bitcoin ETFs have been also moving higher in recent times.

On the other hand, the regional banks in the United States have continued to drag losses for the second consecutive day. The KBW Regional Banking Index experienced a 1.6% decline, marking its biggest single-day drop since the collapse of Signature Bank in March 2023.

New York Community Bancorp (NYCB) shares are sliding, exceeding a 40% decline since Tuesday. The stock is now trading at levels similar to those observed in March 2023.  NYCB has reported major stress on its real-estate portfolio rekindling concerns across the banking space.

The intense selling pressure in banking shares has revived concerns about regional lenders, despite assertions from analysts and investors that the challenges faced by NYCB are largely unique. Moreover, Alexander Yokum, senior equity analyst at CFRA Research, notes that NYCB’s exposure to real estate is much higher than its peers. Speaking to CNBC, Yokum said:

“Last year was definitely the year of deposits. No bank wanted to be in a position where they were seeing deposit outflows. This year, the story changes to credit quality.”

Moody’s has placed NYCB’s ratings under review for a potential downgrade, which might lead it into “junk territory”. Additionally, Morgan Stanley is conducting a review of earnings estimates for the bank. Several other banks, including Bank of America and UBS, have also lowered their target prices for NYCB.

Short Sellers Reap $685 Million Profits Amid Banking Crisis

On Wednesday, the decline in stocks of US regional banks resulted in substantial paper profits for short sellers, amounting to $685 million, as reported by data and analytics company Ortex. The downturn in these bank stocks coincided with significant market movements. This provided an opportunity for short sellers to capitalize on the negative trend.

NYCB’s acquisition of Signature Bank, coupled with its purchase of Flagstar Bank in 2022, elevated its assets beyond the $100 billion regulatory threshold. This threshold triggers more stringent capital and liquidity requirements for the bank. Analysts from Jefferies noted:

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

Analysts suggest that banks offering elevated interest rates on deposits may experience a decline in their NII (net interest income), representing the difference between earnings from loans and payments on deposits. In the first-quarter earnings reports, numerous regional banks indicated a declining NII.

Regional banks could face additional challenges, including exposure to the troubled commercial real estate (CRE) sector. This sector has been strained by high borrowing costs and the impact of remote working.


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