(Bloomberg) -- New York Community Bancorp tumbled for a second straight day as Wall Street downgrades piled up and Moody’s Investors Service put the lender on review for a credit-rating cut.

The company’s shares closed at their lowest level since 2000 on Thursday, sinking 11% and adding to the prior day’s record 38% plunge. Regional bank peers slumped as well, with a closely watched index extending its two-day drop to 8%, the most since the sector’s tumult in March roiled financial markets.

The trigger for the latest losses came Wednesday, when NYCB shocked investors by reducing its dividend, posting a quarterly loss and ramping up loan-loss provisions. The results amped up concern over banks’ exposure to commercial real estate. But part of NYCB’s challenges stemmed from its need to gird for stiffer regulation, after a deal last year for part of collapsed Signature Bank pushed its assets into a new regulatory category.

“The growing pains from being a larger bank will weigh on earnings in the near-to-medium term, and we believe management will need to outperform on credit to regain investor confidence,” RBC Capital Markets analyst Jon Arfstrom wrote in a note to clients. 

“We believe as the market continues to appreciate the value-enhancing actions NYCB has taken the share price will recover,” New York Community Bancorp said in an emailed statement Thursday.

Firms including Compass Point Research, Jefferies and RBC Capital Markets have downgraded their recommendations on NYCB since Wednesday’s market close to hold-equivalent ratings, in addition to cuts made by Raymond James and CFRA earlier in the day.

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NYCB shares did get a brief boost on Wednesday in postmarket trading after the bank released additional guidance on its expectations for net interest income of $2.8 billion to $2.9 billion for 2024. The bank had left details on that metric out of its earnings report, sparking concern it too would surprise on the downside.

‘Overreaction’ 

NYCB’s selloff has erased more than $3 billion in market capitalization. On Wednesday alone, it netted about $100 million in mark-to-market profits for short-sellers betting against it, data from Ihor Dusaniwsky of S3 Partners show.

Some analysts and investors said the rout in regional bank stocks has created an opportunity. 

At JPMorgan Chase & Co., analyst Steven Alexopoulos stuck with an overweight rating on NYCB, saying the issues were specific to that firm and the record slide was a “dramatic overreaction.” At Baird, David George said investors should take advantage of the recent weakness in the sector and recommended Comerica Inc., KeyCorp and Truist Financial Corp.

“This week’s sell-off is creating a solid buying opportunity for the regional group amidst commercial real estate fears,” he wrote in a note.

March Thoughts

Thursday’s continued slide in NYCB and other lenders showed the market wasn’t ready to move on. 

Among regional banks on Thursday, Valley National Bancorp, Western Alliance Bancorp, Zions Bancorp and BankUnited Inc. all fell 5% or more.

The volatility in regional bank stocks evoked comparisons to the jarring swings in the sector in March and May, with the failures of Silicon Valley Bank, Signature Bank and First Republic Bank. 

While the interest-rate challenges that surprised investors in March with Silicon Valley Bank’s failure caught the market off-guard, the question of commercial real estate exposure for regional banks has been a focus since the pandemic began. Concern over the potential for weaker credit contributed to the sector’s sharp underperformance compared to the broader market last year.

However, the surprise results from NYCB came right after dozens of regional lenders and the biggest US banks updated investors over the past few weeks without sparking such sharp reactions or signaling the same degree of challenges. 

Read more: NYCB May Be Cut to Junk by Moody’s Over Risks From Real Estate

“Everybody else that reported before them was pretty much sanguine about 2024 credit quality, saying that losses would increase but it would be more about normalization than deterioration,” said Bloomberg Intelligence regional banks analyst Herman Chan.  

Read more: Traders Snap Up Protection Against Bank Share Slides

--With assistance from Carly Wanna and Lyla Du.

(Updates with commentary, stock moves.)

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