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NYCB Shares Drop as Rate Worries Add to CRE Exposure Risk

Feb 13 (Reuters) - New York Community Bancorp shares fell nearly 4% after inflation data on Tuesday on investor worries that delays to interest-rate cuts could worsen the bank's woes from its exposure to stressed U.S. commercial real estate (CRE) sector.

Consumer price index (CPI) increased 0.3% in January compared to the 0.2% that economists polled by Reuters had forecast, data released by the Labor Department showed.

Investors have been worried that higher borrowing costs and low occupancy rates for office spaces could exacerbate the stress on lenders exposed to potential defaults by borrowers in the CRE sector.

"The interest-rate sensitive real estate sector is under pressure and some banks' exposure to CRE is likely prompting some investors to take some risk off the table," said Bankrate senior economic analyst Mark Hamrick.

The KBW Regional Banking index fell 3.3% and has lost around 8.4% so far this year. Shares of other banks, including Western Alliance Bancorp and Comerica, fell nearly 4% each.

Brokerage Morgan Stanley warned of a bumpy path ahead, saying, "this (inflation) acceleration will be one factor delaying the decision to start cutting rates to June this year."

Since posting a quarterly loss due to higher provisions and slashing its dividend on Jan. 31, the market value of New York-based NYCB has dropped by nearly $4 billion.

The steep slide in its shares began to ease last week after the lender named banking veteran and turnaround expert Alessandro DiNello its executive chair.

He promised to reduce NYCB's exposure to CRE by either selling the loans under that portfolio or allowing them to run off the balance sheet naturally.

On Friday, DiNello and a handful of other top executives also purchased more than $870,000 worth of lender's shares, in an attempt to bolster confidence in the ailing stock.

Reporting by Niket Nishant and Mehnaz Yasmin in Bengaluru; Editing by Arun Koyyur

Source: Reuters

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