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new york community bancorp (NYSE:NYCB) stock rose on Monday after executives announced they would buy the stock.
what happened: NYCB took a breather after its stock rose 7% on Monday, with profits further boosted by the company's executive's disclosure on Friday that he had bought a stake in the bank.
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They bought about $850,000 in stock, according to a regulatory filing with the U.S. Securities and Exchange Commission.
Last week, NYCB stock fell 38% as the lender's exposure to the sector forced it to increase its reserves. This development highlighted the stress in the commercial real estate (CRE) market.
The company also said it is considering some loans to be included in its CRE portfolio.
Overall, the banking industry has approximately $2.7 trillion in commercial real estate debt. With interest rates still at multi-decade highs, it is becoming increasingly difficult for owners and developers to provide services.
“Nearly $900 billion in loans have already been disbursed in the United States that are scheduled to mature over the next two years,” he said. Jeffrey Smithlead analyst for Deloitte's 2024 Commercial Real Estate Outlook.
“These mortgage maturities may also be difficult to refinance in the current lending environment of high borrowing costs and risk-averse lenders,” he added.
Also read: New York Community Bancorps plunge to 26-year low on commercial real estate concerns
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why is it important: The turmoil within CRE may last even longer. Last week, the Federal Reserve Adriana Coogler The central bank said it was eyeing the sector as a potential source of financial stress.
But alternative investment firms are unfazed. They are now buying up distressed CRE assets and providing loans to real estate developers and owners to help banks reduce risk.
ares management For example, (NYSE:ARES) announced in December that it had raised $3.3 billion in real estate secondary capital. The company “seeks to acquire older assets at attractive discounts to market prices in order to build highly diversified portfolios for investors.”
Global real estate funds managed by private equity firms will accumulate $544 billion in funds under management by the second quarter of 2023, The Wall Street Journal reported, citing data from Preqin. , reached a record level.
Local bank raids
Regional banks have greater exposure to the CRE sector than large banks. After all, their balance sheets are small. Also, the potential collapse of one depositor could cause a domino effect as depositors latch on to other depositors.
However, NYCB insisted it had enough capital to withstand stress in the real estate sector.
Investors have been cautious about the sector so far heading into 2024. SPDR S&P Regional Banking ETF The exchange-traded fund ( NYSE:KRE ), which tracks a subsector of the S&P 500, is down nearly 7% since the beginning of the year.
Its largest asset is citizen financial group (NYSE:CFG), Trust Financial Corporation (NYSE:TFC) and Regions Financial Corporation (NYSE:RF) are all down so far this year.
Read now: “The biggest real estate crisis since the financial crisis”
Image: Shutterstock
Become an options master in today's market!
oh! The S&P 500 hit an all-time high. The technology and medical sectors are very hot. It's time to learn the secret to Nic Chahine's 411% return with options. Get his free report now.
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