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Speaker 1: Good morning. It's Wednesday, the seventh of February here in London.

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Speaker 1: This is the Bloomberg daybaq At podcast. I'm Caroline Hipkiit and.

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Speaker 2: I'm Stephen Carroll. Coming up today. Shares in New York

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Speaker 2: Community Banks lump to their lowest since nineteen ninety seven

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Speaker 2: after its credit rating is cut to junk by Moodies.

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Speaker 1: Meanwhile, Janet Yellen says that commercial property loans are a worry,

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Speaker 1: but regulators are on it.

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Speaker 2: And don't call it Soccer. We look at why more

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Speaker 2: and more American investors are taking over English football clubs.

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Speaker 1: Let's start with a roundup of our top stories.

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Speaker 2: New York Community bankcort Stock has dropped to its lowest

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Speaker 2: level in more than two and a half decades after

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Speaker 2: its credit rating was cut to junk by Moodies. The

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Speaker 2: roughly sixty percent decline in the regional bank's shares comes

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Speaker 2: less than a week after NYCB said it was slashing

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Speaker 2: payouts and stockpiling reserves to cover troubled loans tied to

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Speaker 2: commercial property. Our finance reporter Diana Lee explains how the

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Speaker 2: lender found itself in this position.

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Speaker 3: What a special about New York Community Bank is that

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Speaker 3: it is actually one of the winners of last year's

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Speaker 3: regional banking crisis when it acquired loans from Signature Bank

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Speaker 3: that pushed up its asset over one hundred billion dollars,

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Speaker 3: which also made it subject to more regulatory scrutiny in

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Speaker 3: terms of its liquidity and in terms of its commercial

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Speaker 3: real estate concentration. And the company also reported two charge

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Speaker 3: offs and as commercial real estate loans, one as office

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Speaker 3: another one is a co op boaster in New York.

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Speaker 3: It also has some exposure to the rent stabilized loans

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Speaker 3: in New York, which is subject to a lot of

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Speaker 3: regulations that kind of adds to the concerns we're seeing here.

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Speaker 2: Danite reporting there from New York. US regional lenders have

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Speaker 2: seen their values come under pressure following NYCB's results. The

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Speaker 2: KBW Regional Banking indexes down around twelve percent this year.

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Speaker 2: The turmoil in US commercial real estate has also bled

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Speaker 2: into Europe and Asia. Tokyo based Azora plunged by more

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Speaker 2: than twenty percent in Frankfurt's Deutsche Bank more than quadrupled

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Speaker 2: its US real estate last provisions.

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Speaker 1: US Treasury Secretary Janet Yellen says that she is concerned

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Speaker 1: about commercial real estate, but thinks that the risk is manageable.

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Speaker 1: She spoke to the US House Financial Services Committee on Tuesday.

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Speaker 4: I do have a concern about commercial real estate. I

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Speaker 4: believe it's manageable, although there may be some institutions that

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Speaker 4: are quite stressed by this problem.

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Speaker 1: Yellen says that a combination of factors are to blame,

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Speaker 1: including interest rates, higher vacancy rates thanks to shifting work patterns,

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Speaker 1: and a wave of commercial real estate loans coming due

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Speaker 1: this year. The US Treasury Secretary was specifically asked about NYCB,

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Speaker 1: but declined to comment on a single institution.

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Speaker 2: Investor confidence in China is rising amidst further signs of

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Speaker 2: policy support from Beijing. The hope is for stronger government

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Speaker 2: action to end a seven trillion dollar route in the

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Speaker 2: Chinese stock market, which has been posing a growing threat

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Speaker 2: to financial and social state ability in the country. Bloomberg's

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Speaker 2: Yvonne Mann has more from Hong Kong.

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Speaker 5: The anticipation follows the Bloomberg report that regulators are plentning

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Speaker 5: to brief President Chijingping on the issue. It's seen as

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Speaker 5: underscoring the urgency of staving off a further route in

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Speaker 5: Chinese assets. Even so it's not clear if the President

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Speaker 5: will see fit to provide additional support, but policymakers are

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Speaker 5: hoping to stabilize markets before the Lunar New Year holiday

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Speaker 5: to build confidence. It's also unclear if investors will buy

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Speaker 5: into the story, given them many previous false dawns, but

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Speaker 5: the NAZE Golden Dragon Index did gain nearly six percent

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Speaker 5: in New York. In Hong Kong, I'm yvon Mann Bloomberg Radio.

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Speaker 1: The US House of Representatives has failed to pass a

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Speaker 1: funding package for Israel amidst a wider political battle of

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Speaker 1: a spending for Ukraine and US Budha policies. President Biden

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Speaker 1: threatened to vito the seventeen point six billion dollar bill

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Speaker 1: because it didn't include money for Ukraine, causing most Democrats

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Speaker 1: to oppose it. Other Democrats criticized the measure for not

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Speaker 1: mentioning Palestinian aid, while some Republicans complained that its price

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Speaker 1: was not offset by cuts elsewhere. The news comes as

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Speaker 1: Joe Biden says that legislation on border controls is being

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Speaker 1: sabotaged by Donald Trump.

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Speaker 6: The result of all this hard work is a bipartisan

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Speaker 6: agreement that represents the most fair, humane reforms and our

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Speaker 6: immigration system in a long time, and the toughest set

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Speaker 6: of reforms to secure the border ever. Now, all indications

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Speaker 6: are this bill won't even move forward to the Center floor.

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Speaker 6: Why a simple reason, Donald Trump. Because Donald Trump thinks

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Speaker 6: it's bad for him politically.

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Speaker 1: President Joe Biden speaking there, this week's vote was an

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Speaker 1: attempt by the House Speaker, Mike Johnson to curtail a

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Speaker 1: deepening Senate stand off over the combined Israel, Ukraine and

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Speaker 1: Border Policy bill.

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Speaker 2: Here in the UK, politicians are calling on the Bank

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Speaker 2: of England to rethink quantitative easing asset sales, warning of

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Speaker 2: the cost to taxpayers. MPs on the Treasury Select Committee

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Speaker 2: say the central Bank has taken a leap in the

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Speaker 2: dark with the policy. The criticism comes after calls from

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Speaker 2: economists for the BOE to reconsider the speed at which

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Speaker 2: it's selling assets and realizing losses that the Treasury has

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Speaker 2: to cover with taxpayer money. The bank estimates the losses

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Speaker 2: in the years ahead could total two hundred billion pounds.

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Speaker 2: In response, the Bank of England says it will consider

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Speaker 2: the findings carefully.

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Speaker 1: UK households should start to feel better off during twenty

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Speaker 1: twenty four. That's according to new data from the National

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Speaker 1: Institute of Economic and Social Research, Nissa bloombergs Taba Adebayo

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Speaker 1: has the details.

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Speaker 7: The worst of the cost of living crisis could be over.

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Speaker 7: The think tank NISAS says inflation will fall to one

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Speaker 7: point two percent by June and living standards will rise

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Speaker 7: by an average of one point five percent over the

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Speaker 7: next two years, but not everyone will feel the benefits equally.

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Speaker 7: The research predicts things will get worse for the forest households,

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Speaker 7: who will fail to see real income's return to pre

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Speaker 7: pandemic levels until twenty twenty seven. Would the forecasts come

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Speaker 7: a warning for the government that without a significant boost

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Speaker 7: of public spending, the UK will still fall victim to

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Speaker 7: sluggish economic growth. In London, Twa Adabaio Bloomberg Radio.

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Speaker 1: Now in a moment, we're going to get more on

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Speaker 1: the challenges facing the New York Community Bank, this as

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Speaker 1: US regional banks are under more pressure now. Plus also

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Speaker 1: why more American investors are being drawn to English football.

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Speaker 1: But first, another story that caught our rie this morning.

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Speaker 1: The UK's soaring rents making buying a home a better

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Speaker 1: option once more. This hasn't really been the case for

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Speaker 1: the past few years, but capital economics says that that's

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Speaker 1: all going to change for the next five Yeah. I know.

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Speaker 2: There was only really a brief period where renting was

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Speaker 2: better off, and that's because mortgage rates were going up

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Speaker 2: by so much and as people were refixing their mortgages,

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Speaker 2: they're finding they were paying an awful lot more than

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Speaker 2: they had been before. But because trajectory for rents has

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Speaker 2: been upward and accelerating upward in the past eighteen months

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Speaker 2: or so, the balance has now tipped back to where

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Speaker 2: you are worse off as a renter than as a

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Speaker 2: home bar So there was only really this sort of

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Speaker 2: one could call it a honeymoon period. I don't think

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Speaker 2: anyone who rents would call it that, But no, there

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Speaker 2: was only a brief period where it was weighed in

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Speaker 2: favor of renters because the increases were lower than what

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Speaker 2: people were paying on their mortgages. But things are back

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Speaker 2: to their unpleasant normal.

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Speaker 1: Yeah. And the unpleasantness is also the fact that so

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Speaker 1: many landlords are trying to get out of the renting business,

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Speaker 1: and that the fundamental issues in the UK housing, you know,

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Speaker 1: economics is always sort of supplied demand in balance. So anyway,

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Speaker 1: really nice, interesting story though to track capital economics, we've

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Speaker 1: written it up on the Bluemberg terminal.

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Speaker 2: Well, let's get more now on that story around New

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Speaker 2: York Community Bank. Bloomberg Critty grouped is with us to

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Speaker 2: talk us through the downgrade what that means for US

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Speaker 2: regional banks. Critty, let's start with what actually Moody's said

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Speaker 2: about the state of New York Community Bank.

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Speaker 8: Yeah, well, Lisa, that they are having some concerns around

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Speaker 8: the governance risk, which is pretty interesting. They're specifically targeting

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Speaker 8: the management here and saying that they're second and third

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Speaker 8: lines of defense that they really think creates a fortitude

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Speaker 8: within a community bank, things of risk audit for example.

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Speaker 9: Those are the concerns that they have.

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Speaker 8: Now, they did say that they're not looking at liquidity

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Speaker 8: just yet, but it is something that they're going to

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Speaker 8: be monitoring going in the days and months ahead. Simply

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Speaker 8: on this idea that this is not potentially the last

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Speaker 8: downgrade from Moodies, they could actually create a little bit

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Speaker 8: more pressure on it as well.

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Speaker 1: Okay, well, investors have floated with their feet in quite

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Speaker 1: a big way. How has the bank responded to this.

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Speaker 8: Well, the bank has really talked about ensuring that liquidity.

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Speaker 8: They're saying a lot of the junk rating, the rating

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Speaker 8: for Moodies, excuse me, isn't going to affect some of

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Speaker 8: their kind of lines of financing, lines of credit that

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Speaker 8: they are trying to get at the moment. But that

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Speaker 8: being said, there is a big difference between arranging for

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Speaker 8: lines of credit and actually being able to get them

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Speaker 8: and being able to recover from this. Remember, this is

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Speaker 8: a story that is so idiosyncratic for a lot of people.

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Speaker 9: People don't really know that New York Community Bank Orp.

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Speaker 8: Is the biggest chunk is rent regulated kind of real estate.

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Speaker 9: So basically what that means is a landlord in New York.

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Speaker 8: City, where property prices already extremely high demand, is already

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Speaker 8: kind of insatiable, can't charge as much and they can't

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Speaker 8: increase rents as much as you would in a traditional market.

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Speaker 8: It's just simply capped for affordability issues. What that does

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Speaker 8: done in a rising interest rate environment is create basically

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Speaker 8: losses that you have to take because you can't get

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Speaker 8: that return. That's the concern, and so far, the commentary

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Speaker 8: around it has been that this is a New York

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Speaker 8: Community Bank or specific issue. The question is, how do

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Speaker 8: you get out of it when interest rates are likely

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Speaker 8: to ran high for a while.

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Speaker 2: And well, on that note, I mean Janet Yellen was

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Speaker 2: talking about this in Washington yesterday saying that she's concerned,

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Speaker 2: but it's manageable. How is the rest of the sector

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Speaker 2: dealing with issues around.

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Speaker 8: This, Well, it is still being viewed as idiosyncratic. And

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Speaker 8: this is not a kind of Silicon Valley Bank two

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Speaker 8: point zero that I think a lot of people had

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Speaker 8: initial thought it would be simply because if you actually

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Speaker 8: look at some of the liquidity portfolios and the way

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Speaker 8: the metric that you do.

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Speaker 9: When I get a little nerdy here, bear with me.

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Speaker 8: Our Herman channe overt Bloomering Intelligence did the math on this.

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Speaker 8: If you look at the metric here of how much

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Speaker 8: liabilities you have and how many uninsured deposits you have,

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Speaker 8: the rate comes out about thirty percent.

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Speaker 9: So that's your risk portfolio basically.

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Speaker 8: But he said, if you look at that in line

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Speaker 8: with some of the other banks as well, everyone kind

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Speaker 8: of has that metric. So liquidity, even though they're trying

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Speaker 8: to get it for this very idiosyncratic issue, it's not

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Speaker 8: a panic moment just yet.

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Speaker 1: Yeah, but I suppose it's still a shock in an industry,

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Speaker 1: you know that is being closely watched, obvious see, but

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Speaker 1: it's kind of a known risk though, isn't it, which

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Speaker 1: it seemed to be what Yellen was pointing to. What

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Speaker 1: happens next? Then do you think what are we going

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Speaker 1: to be watching out for?

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Speaker 9: Well, we're going to be watching for the ripple effects.

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Speaker 8: Look, I think there was a bigger expectation of the

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Speaker 8: Silicon Valley bank story would have a bigger repercussions, and

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Speaker 8: it did for a hot second, But you didn't actually see,

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Speaker 8: for example, a GFC two point oh.

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Speaker 9: You didn't see a bigger crisis.

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Speaker 8: And if you actually look at the way that this

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Speaker 8: issue is coming about, it's not necessarily in the products

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Speaker 8: and the actual fundamental real estate. And that's what Jenny

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Speaker 8: Ellen said as well. This is a different story. We're

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Speaker 8: talking about demand, we're talking about work from home. It's

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Speaker 8: not the same as flowers and the product itself, which

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Speaker 8: is what two thousand and eight, for example, was.

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Speaker 2: Okay, Christy Goatee, thanks so much for talking us through

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Speaker 2: the latest on that story.

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Speaker 1: Now, Color United is the latest football team in England

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Speaker 1: and Wales to be taken over by American investors. It's

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Speaker 1: hardly a big name. It is currently placed last in

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Speaker 1: England's third tier, but the takeover by the Piatch family

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Speaker 1: demonstrates American investors big appetite for English football. I mean

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Speaker 1: this after, of course, the landmark two and a half

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Speaker 1: billion pound deal for Chelsea just a couple of years ago.

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Speaker 1: Birmingham City, Wrexham, Crawley and Ipswich have also recently been

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Speaker 1: bought out by Americans. Now Bloomberg's David Hellier has been

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Speaker 1: looking into this and joins us. Now, David, I know

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Speaker 1: that you are a huge football fan and you are

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Speaker 1: immensely knowledgeable about football finance. What is it that is

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Speaker 1: so attractive about English clubs for Americans?

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Speaker 10: I think, I mean principally they see England as the

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Speaker 10: kind of center of European football with big television deals,

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Speaker 10: especially for the richer clubs, and the Americans since the

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Speaker 10: Manchester United takeover in two thousand and five have been

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Speaker 10: looking across the pond. But more recently well, I think

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Speaker 10: that Carlisle takeover illustrates is that more recently the Americans

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Speaker 10: have been going lower down into the League's Wrexham obviously

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Speaker 10: as another one where the Hollywood actors took over a

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Speaker 10: club that was languishing, not even in the league itself,

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Speaker 10: but below the league, and has transformed it in a

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Speaker 10: short space of time. So I think there's sort of

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Speaker 10: financial gains. But the other thing is that it's very

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Speaker 10: difficult to buy American clubs. They're much more expensive. They

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Speaker 10: rarely go on the market. There's much more competition for them.

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Speaker 10: So I think Americans have looked overseas to Europe generally

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Speaker 10: to find investments.

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Speaker 2: What sort of obstacles do American investors find when they

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Speaker 2: are trying to buy up clubs in Europe.

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Speaker 10: I think fewer obstacles in England than in the rest

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Speaker 10: of Europe. England you've got the language being the same principally,

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Speaker 10: it's also a much freer market. Spanish clubs are quite

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Speaker 10: hard to take over. There are a lot of American

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Speaker 10: investments in Italy. In Germany, it's very difficult because the

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Speaker 10: German football system has run differently, so it's run with

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Speaker 10: the interest of fans in mind. There's a rule that

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Speaker 10: prevents foreign ownership from having more than fifty percent of

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Speaker 10: voting control. They've bought clubs in France, so there are

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Speaker 10: fewer obstacles in England than in the rest of Europe

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Speaker 10: in actually buying the clubs in the first place. I mean,

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Speaker 10: when you do buy them, there's kind of a lot

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Speaker 10: of risks involved.

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Speaker 1: So then how successful have American investors been in English football?

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Speaker 1: And I so it's also how do you assess that success.

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Speaker 10: In financial terms? The Glazer family that bought Manchester United

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Speaker 10: and kind of started this whole American invasion of financially,

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Speaker 10: they've been pretty successful. They bought Manchester United with loans mainly,

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Speaker 10: they didn't put any much equity into the club, and

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Speaker 10: they bought it for seven hundred million in two thousand

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Speaker 10: and five, and they recently sold twenty five percent to

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Speaker 10: Jim Ratcliffe for one point two five billion. Plus. They've

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Speaker 10: taken out dividends and you know, have basically seen the

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Speaker 10: value of their investment rise quite considerably. The same as

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Speaker 10: applied to Fenway Sports Group, who bought Liverpool for even less,

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Speaker 10: for three hundred million, and Liverpool has been very successful

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Speaker 10: thanks in large part to their manager, Jergen Clock who's

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Speaker 10: now leaving. Forbes values Liverpool around five million dollars. Now,

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Speaker 10: certainly a four billion type valuation is realistic. We feel

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Speaker 10: so those two have been very successful, but there's been

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Speaker 10: a whole string of disastrous investments. Some people might remember

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Speaker 10: Elis Shaw to Sunderland. It's reported to have lost two

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Speaker 10: hundred million. It got relegated a couple of times. Randy

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Speaker 10: Lerner Aston Villa. The Chelsea owners must be rethinking how

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Speaker 10: successful the bid has been already.

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Speaker 2: This is Bloomberg Daybreak Europe, your morning brief on the

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