The company said it won’t be able to file its annual report in time, and it took a charge worth $2.4 billion against its results for the last three months of 2023. Its CEO stepped down after 27 years with the company, effective immediately.

Much attention has been on smaller regional banks after last year’s crisis in the industry led to the collapses of several. One of them, Signature Bank, was swallowed up by NYCB, which has caused the resulting bank to face stricter oversight amid struggles for loans tied to real estate.

While NYCB faces many issues that are specific to it, the worry has been that banks across the industry face challenges from loans made for real-estate projects.

They’re under pressure in part because the Federal Reserve has hiked its main interest rate to the highest level since 2001, which can squeeze the financial system. The hope has been that the Fed will cut interest rates several times this year to offer some relief for banks and the broader economy.

The Fed has indicated it may do so if inflation continues to cool decisively toward its 2 per cent target. But a string of stronger reports on the economy than expected have made traders push back forecasts for when the cuts could begin. The hope now is that the Fed could start in June after traders shelved earlier expectations for March.

Hopes for a June cut built after a report showed the US manufacturing industry shrank in February for a 16th straight month. Manufacturing has been one of the weakest-performing areas of the economy, while a resilient job market and spending by US consumers have propped it up. The report from the Institute for Supply Management also said prices paid by manufacturers for raw materials rose again, but at a slower pace than in January.

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A separate report from the University of Michigan said sentiment among US consumers was weaker than economists expected. It slipped in February from January but held most of the gains seen in recent months. That’s important because spending by US consumers makes up the bulk of the economy.

In the bond market, Treasury yields sank following the reports. The yield on the 10-year Treasury fell to 4.18 per cent from 4.25 per cent late Thursday and from 4.28 per cent just before the data’s release.

The two-year Treasury yield, which more closely tracks expectations for the Fed, sank to 4.53 per cent from 4.62 per cent.

Economists at Deutsche Bank expect the Fed to cut its main interest rate by 1 percentage point this year, down from its current range of 5.25 per cent to 5.50 per cent. Like many traders, they also expect the Fed to start in June.

But chief US economist Matthew Luzzetti also says there are several reasons to be cautious about cuts. One is that stock prices have already rallied and Treasury yields have already sunk on expectations for coming cuts, which loosens conditions for the economy and could add upward pressure on inflation.

In stock markets abroad, Japan’s Nikkei 225 jumped 1.9 per cent. Indexes rose more modestly across the rest of Asia and Europe.

AP

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