Yeah, well, there was a fear it might come, there were hints it might come, there were expert predictions it might come, there were small kids yelling: “It’s coming, it’s coming,” and this week it came: the office loan losses. It wasn’t a lot, but enough to evoke that fuzzy feeling of I-told-you-so.
New York Community Bancorp (NYCB) had the questionable honor of releasing its quarterly statement which was marked by a couple of self-inflicted wounds. The first one was a sharp increase in charge-offs on two CRE loans that NYCB sees no chance of recovering. The second one was increased provisions for future CRE losses.
NYCB was already big on commercial real estate—as many regional banks are—and last year it bought up some of Signature Bank’s deposits and loans at what it thought was a bargain but now with the empty office buildings and higher-for-longer rates looks more like a whoopsie. To add salt to the wounds, taking Signature BS in also pushed NYCB into the Large Bank Club which brings along a membership of stricter and more expensive regulation.
All this dunked NYCB’s share price more than 40%.
But NYCB was not the only butterfly fluttering its wings for effect.
In Japan, Aozora Bank saw its shares plummet 20%–the maximum allowed in a day— and let its president go due to losses on US office loans.
And in Switzerland, the chief executive of the bank Julius Baer resigned because it instead of blossoming in the absence of Credit Suisse blew major loans on offices. To show its resolve to right its wrong, Julius Baer also shut the door on the unit originating the loans right after the borrowers left.
All of this is, of course, emblematic for the cream of credit crisis and concern we will be wading through for the foreseeable future. Worrying about what can happen will only be interrupted by it actually happening. And mixed metaphors, always mixed metaphors.
Regitze Ladekarl, FRM, is FRG’s Director of Company Intelligence. She has 25-plus years of experience where finance meets technology.