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Following Zohran Mamdani’s victory in the New York City Democratic mayoral primary, Morgan Stanley said the likelihood of rent freezes on New York City rent regulated apartments has increased, which is a negative for Flagstar Financial (FLG). Flagstar has made significant improvements in the credit quality of its portfolio and has increased reserves more than four times since the last rent freeze in 2020, notes the analyst, who thinks a one year rent freeze is “manageable” for the bank. However, given Flagstar’s skew to rent regulated properties, it also thinks more than one year of rent freezes would drive higher reserve build. The firm has an Equal Weight rating and $13 price target on Flagstar shares.

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Disclaimer & DisclosureReport an Issue

• Flagstar Financial Inc put volume heavy and directionally bearish

• Unusually active option classes on open June 25th

• Flagstar Financial Inc call volume above normal and directionally bullish

• Flagstar Financial Holds Virtual Shareholders’ Meeting

• Flagstar Financial initiated with a Buy at Jefferies