(Bloomberg) -- Commercial real estate risks are a headwind for the banking sector but not a crisis as they are “manageable,” according to analysts at Citigroup Inc.

Concerns over banks’ exposure to CRE have been in focus in the wake of New York Community Bancorp Inc.’s earnings last month, which included higher provisions and charge-offs than analysts had expected.

“Despite recent revelations about commercial real estate exposures at New York Community Bank, markets have remained somewhat sanguine about potential fallout from CRE to the banking system more broadly — and, in our view, the fundamentals look reasonably aligned with the market’s assessment,” analysts including Nathan Sheets wrote in a note.

The analysts highlight shares of Citizens Financial Group and M&T Bank Corp. as opportunities “to leverage our view that fears are currently overblown.” Citi analyst Keith Horowitz has buy ratings for both banks after upgrading Citizens earlier this month. The analysts also highlighted KeyCorp, Popular Inc., Comerica Inc. and First Horizon Corp. as benefiting from limited exposure to office real estate.

“While we understand CRE concerns considering the NYCB results, we do not think those results should be viewed as a read-through to the entire industry,” the analysts wrote.

Equity investors have reacted differently to NYCB than they did to the regional banking tumult in March 2023, the analysts note. The KBW Bank Index is little changed this year, while a regional gauge that includes New York Community Bancorp is down by about 10%. 

NYCB has tumbled by more than half since the beginning of the year, following a relatively strong performance among regional bank stocks in 2023 amid its deal for part of Signature Bank. “The bank index this time is much more resilient than it was in 2023,” they wrote.

There are key differences to the lead-up to the Global Financial Crisis, with banks losing some market share seen as a “positive regarding the credit risk outlook.” While credit growth in the banking system outpaced gross domestic product growth going into the GFC, credit growth has recently been in line, according to the analysts.

They expect additional one-time credit events, but are “not expecting outsized losses given these fundamental industry changes.”

©2024 Bloomberg L.P.