Yuanhui Liang’s Post

You’ve likely felt concerns over concentrations of distressed commercial real estate across the banking industry. Consistent with headlines, the rate environment and sizable provisions for credit losses, coupled with the recognition of realistic income-based valuations, may present a notable impact. More US Regional Bank Failures May Be Coming https://lnkd.in/ehpWjDdX

Over half of all banks (51%) are suffering negative carry, which is affecting their return on tangible common equity (ROTCE). This is due to the difference between the yield they earn on mortgage-backed securities and the rate they must now pay to fund these securities on the balance sheet. Unfortunately, many banks can't afford to realize these losses, which is further compounding the issue. To learn more about this issue and how it is impacting banks, read our analysis. https://lnkd.in/esb3vgse

Interesting article outlining bank balance sheet problems and likely forced M&A / capital raising coming. Banks are in limbo without a key lifeline. Here's where cracks may appear next https://lnkd.in/efji9mgW

In The New York Times, White & Case partner Douglas Landy discusses how bank regulators, in particular the Office of the Comptroller of the Currency, are looking at community banks and small regional lenders to make sure those institutions are moving to reduce their overall loan exposure or are raising more capital to cover any losses, as investors worry that these banks could be a crisis waiting to happen. https://ow.ly/HieZ50SLFB9

In The New York Times, White & Case partner Douglas Landy discusses how bank regulators, in particular the Office of the Comptroller of the Currency, are looking at community banks and small regional lenders to make sure those institutions are moving to reduce their overall loan exposure or are raising more capital to cover any losses, as investors worry that these banks could be a crisis waiting to happen. https://ow.ly/UhI450SLjVS

The health of regional U.S. banks has recently been called into question, with ratings agency S&P Global downgrading five banks due to their exposure to commercial real estate (CRE). This move has reignited concerns among investors about the sector's stability. #Banks #Downgrades #Global #Negative #outlook #Regional #US

I have had lots of conversations lately with clients who have money on deposit that is attracting less than 1% interest. These conversations are about discussing why their money should be working harder for them to enable them to try to at least beat the inflation rate to protect the spending power of their money. There are so many options out there to diversify their savings and limit risk but with the opportunity to gain returns higher than inflation over the medium to long-term. Many clients understand the risks of investing in equities (the highest risk asset class) but do not understand the risk of leaving their money on deposit and also helping the banks increase their massive profits. If you would like to discuss the alternatives to deposit accounts and to diversify your savings, please do send me a DM. Have a great week. #financialwellbeing #poordepositrates #diversifyinvestments #makemoneyforyounotthebanks https://lnkd.in/egKZner7 

In The New York Times, White & Case partner Douglas Landy discusses how bank regulators, in particular the Office of the Comptroller of the Currency, are looking at community banks and small regional lenders to make sure those institutions are moving to reduce their overall loan exposure or are raising more capital to cover any losses, as investors worry that these banks could be a crisis waiting to happen. https://ow.ly/traR50SN3oM

Shadow Bank Loans Top $1 Trillion as US Regulators Warn of Risks (April 2024) - Banks’ lending to non-bank financial firms has steadily risen - Janet Yellen said this week that officials are monitoring risk The amount that US banks have loaned to so-called shadow banks surpassed the $1 trillion mark, according to Federal Reserve data, even as regulators warn of potential risks to the financial system. - The Fed reported Friday that lenders crossed the threshold in loans outstanding to non-deposit-taking financial companies such as fintechs and private credit investors at the end of January. The figure was about $894 billion a year earlier, the data show. Learn more about Bloomberg Law or Log In to keep reading: https://lnkd.in/gZFJkH4g

Bond traders are discounting the bonds issued by banks with heavy CRE exposure. (Which is not a huge surprise.) "Some of the regional lenders with portfolios weighted toward underperforming commercial real estate markets include Bank OZK, Valley National Bancorp and Webster Financial Corp., according to Morgan Stanley. None of the trio of banks responded to requests for comment from Bloomberg News. Barclays says that Webster has commercial real estate exposure equal to more than 250% of its capital. The Stamford, Connecticut-based bank has bonds due 2029 that traded at spreads of nearly 200 basis points, or 2 percentage points. Those spreads have been widening since late January. ...... In the US, smaller banks are relatively more exposed to commercial property: They have more than two thirds of the commercial real estate loans in the banking system, despite having about a third of the assets, according to data from the Federal Reserve." On the other hand, Steve Mnuchin just invested $1B in NYCB, so opinions on the real level of risk here vary. https://buff.ly/3Toz12Z