After agreeing to take over Signature Bank's deposits and some of its loans, the Bloomberg New York Community Bancorp Inc. surged by a record Monday, leading a rally in regional bank stocks.
The bank's shares went up 32% for its biggest gain ever, after gaining 32% of its holdings in Hicksville, New York. It became the best performing member of the KBW Regional Banking Index, which rallied 1.5% on Monday. First Republic Bank extended its rout to close at an all-time low.
Wedbush analyst David Chiaverini said that NYCB is benefiting from a sweetheart deal, as the Federal Deposit Insurance Corp. priced the assets to move quickly. In exchange for the $2.7 billion discount on acquired loans, plus the interest income earned on the loans and securities, NYCB will give up $300 million in equity appreciation rights to the FDIC, he said.
Monday s rally across regional banks helped stem what had been a brutal two-week stretch for the sector after the collapse of Silicon Valley Bank and Signature Bank. UBS Group AG took over Credit Suisse Group AG on Sunday and calmed the nerves of investors.
PacWest Bancorp gained 11%, while BankUnited Inc. went up 4.8% among other regional lenders rallying to start the week. Since November 2020, First Citizens BancShares Inc. has jumped by the most since, after a report that it is still hoping to make a deal for all of Silicon Valley Bank. Wall Street's larger firms rallied with JPMorgan Chase Co. Morgan Stanley and Goldman Sachs Group Inc. each climbing by more than 1%.
Despite a rebound for the majority of the banking sector, First Republic shares faced renewed selling, plunging 47% and triggering multiple volatility stops during the day. After reports that JPMorgan Chief Executive Officer Jamie Dimon is leading discussions on new efforts to stabilize the lender, the San Francisco-based lender extended its drop.
S&P has cut its credit rating for the second time in less than a week, adding more pressure to shares.
While analysts believe that continuing deposit flight from regional banks will hurt liquidity and potentially spark a credit crunch, some view the recent selloff as an opportunity for investors to buy the dip.
Baird analyst David George said that this is one of the best risk reward trade-offs in this group that we have seen in our 23 year career, and that the KBW Bank Index dropped 15% last week. None A Visual Guide to How America Uses Freight Trains