U.S. regional-bank shares on Monday extended their slide from last week, as traders reacted to the latest comments from Federal Reserve Chair Jerome Powell saying the central bank is planning on waiting to cut interest rates until later this year.
The SPDR Regional Banking ETF
KRE
was down 1.6% in recent trading, building on a 7.2% drop from last week, according to FactSet data. That decline marked the biggest weekly drop for the ETF since the week ended June 23 of last year.
The biggest loser among the ETF’s holdings on Monday was New York Community Bancorp Inc.
NYCB,
which kicked off the latest round of weakness among regional-bank shares last week when it reported a surprise quarterly loss, cut its dividend and increased its loan-loss provisions to $552 million, shocking analysts.
The news revived investors’ concerns about the sector’s exposure to struggling commercial-real-estate loans. It also triggered a 37% drop in NYCB shares on Wednesday, their largest daily drop ever, while sending shares of KRE down by double digits between Wednesday and Thursday — the ETF’s largest two-day drop since the aftermath of Silicon Valley Bank’s collapse in March 2023.
New York Community Bancorp purchased some of the assets belonging to Signature Bank, which was one of three U.S. banks that failed in quick succession last March, forcing the Federal Reserve to extend a new credit facility to the banking system.
Peter Winter, an analyst at D.A. Davidson who covers regional banks, blamed Monday’s weakness on Powell’s remarks from an interview with “60 Minutes” that aired Sunday. During the interview, Powell reiterated that the Fed would likely wait until beginning to cut rates, further weighing down market expectations for a rate cut at the Fed’s upcoming March meeting.
“It’s all about Powell and delaying the rate cut,” Winter said in a phone interview with MarketWatch.
Winter explained that lower rates would ease pressure on borrowers who might otherwise struggle to pay their loans with rates at current levels.
“I think the whole space would, from a credit perspective, benefit from starting to see rates come down,” he added.
