{"id":9148,"date":"2024-04-22T09:00:46","date_gmt":"2024-04-22T06:00:46","guid":{"rendered":"https:\/\/ch.jfdi.cc\/?p=9148"},"modified":"2024-04-22T09:00:46","modified_gmt":"2024-04-22T06:00:46","slug":"us-regional-banks-seen-booking-more-commercial-property-losses-loan-sales","status":"publish","type":"post","link":"https:\/\/ch.jfdi.cc\/?p=9148","title":{"rendered":"US regional banks seen booking more commercial property losses, loan sales"},"content":{"rendered":"<div><img decoding=\"async\" src=\"http:\/\/ch.jfdi.cc\/wp-content\/uploads\/2024\/04\/us-regional-banks-seen-booking-more-commercial-property-losses-loan-sales.jpg\" class=\"ff-og-image-inserted\"><\/div>\n<p><strong>By Saeed Azhar and Matt Tracy<\/strong><\/p>\n<div class=\"cypru-video-ads\" id=\"cypru-1325850448\">\n<div id=\"cypru-1073020835\" data-cypru-trackid=\"478051\" data-cypru-trackbid=\"1\" class=\"cypru-target\">\n<div id=\"gpt-ad-4241957341309-0\">\n<\/div>\n<\/div>\n<\/div>\n<p>US regional banks are expected to set aside more money to cover potential commercial real estate (CRE) losses and sell more property loans as the sector remains under pressure a year after the collapse of Silicon Valley Bank and Signature Bank.<br \/>\nMost multifamily loans are made by regional banks, so when New York Community Bank (NYCB.N) posted a surprise fourth-quarter loss it intensified fears about the industry\u2019s exposure to commercial real estate. Multifamily properties with more than five units are a major concern, especially since the bank had booked losses on its real estate portfolio.<br \/>\nScrutiny of regional banks has increased after Silicon Valley Bank\u2019s collapse prompted by high borrowing costs that exceeded its income from low-rate loans following the Federal Reserve\u2019s aggressive rate hikes since March 2022. Many banks have unrealized losses on securities portfolios, including mortgage-backed paper.<br \/>\nA slew of regional banks report first-quarter earnings starting April 16.<br \/>\n\u201cI expect to see more of a reserve buildup,\u201d said Stephen Buschbom, research director at consultancy Trepp.<br \/>\nBuschbom said office loans remain the \u201cbiggest pain points\u201d for banks, but he also expects stress in the multifamily sector especially construction loans.<br \/>\nOffice loans have been hit as many employees still work from home after the pandemic, leaving vacancies that make it tougher for building owners to repay their mortgages. Multifamily is also under pressurein cities like New York and San Francisco that, right before the pandemic, severely limited rent hikes on regulated apartments based on record low interest rates and inflation at the time.<br \/>\nNon-performing CRE loans as a percentage of US banks\u2019 portfolios doubled to 0.81 per cent by the end of 2023 from 0.4 per cent a year earlier, the International Monetary Fund said in its semi-annual Global Financial Stability report. Banks have continued to increase provisions for bad CRE loans, the IMF noted on Tuesday.<br \/>\nSeveral analysts and investors are predicting higher reserves. Morgan Stanley forecast a 10- to 20-basis point increase in CRE reserve ratios for regional banks this year, said Manan Gosalia, an analyst at the Wall Street bank, in a research note. Aggregate provisions are 20 per cent above consensus, she added.<br \/>\nStephen Biggar of Argus Research agreed, saying high office vacancies have reduced cash flows, and the Fed\u2019s stance on keeping interest rates higher for longer makes financing expensive.<br \/>\nCRE holdings are significant across the US banking industry, comprising 13 per cent of large banks\u2019 balance sheets and 44 per cent for regional banks, an Ares Alternative Credit report showed.<br \/>\nReflecting investor sentiment, the KBW regional bank index (.KRX) is down 13.5 per cent year to date versus the S&amp;P bank index\u2019s (.SPXB) 6.8 per cent rise.<br \/>\nS&amp;P Global Ratings downgraded the outlook for five US banks in March because of stress in CRE markets, which it said may hurt their asset quality and performance.<br \/>\nThe banks cited, including M&amp;T Bank (MTB.N) and Valley National Bancorp (VLY.O), declined to comment.<br \/>\n\u201cThe CRE delinquency rate for banks is more benign than the commercial mortgage-backed securities market, but deteriorating,\u201d Stuart Plesser, managing director (at rating agency S&amp;P Global Ratings, told Reuters, saying he sees some reserve increase for banks.<br \/>\nThe delinquency rate at regional banks is 1.2 per cent for loans 30 days due as of the end of the fourth quarter, according to S&amp;P Global, below the 4 per cent for CMBS.<br \/>\nBuschbom, however, said the level of support from potential buyers, including private equity investors, will help reduce some downside risks for banks. Office loans are selling at deep discounts, while multifamily properties have smaller discounts, industry sources said.<br \/>\n\u201cNumerous community and regional banks are exploring their options and, as a result, we are seeing more deal flow than we have since the global financial crisis,\u201d said David Aviram, co-founder of real estate investment firm Maverick Real Estate Partners.<br \/>\nA senior Wall Street banker who declined to be named discussing sensitive information said banks are expected to offload existing loans to private lenders and that those lenders would originate new loans.<br \/>\nAmong such deals, regional lender PacWest last year sold construction loans with a $200 million discount, a regulatory filing showed.<br \/>\nIn December Signature Bridge Bank, whose predecessor Signature Bank collapsed in 2023, sold 20 per cent of its equity stake in a venture that held a $16.8 billion real estate loan portfolio to a Blackstone-led (BX.N) consortium for $1.2 billion. The discount on the portfolio was nearly 30 per cent, based on data from the announcement by Blackstone.<br \/>\n\u201cWe see banks taking a more conservative approach and anticipate additional write-offs in coming quarters,\u201d said Ran Eliasaf, founder and managing partner at Northwind Group, a private equity firm over $3 billion assets under management.<br \/>\n\u201cThere\u2019s a much more dramatic drop in values than what the market estimated in 2023.\u201d<br \/>\nAnalysts, however, do not expect turmoil from the banking sector\u2019s exposure to commercial real estate.<br \/>\n\u201cThis is a slow wreck, not a high-speed crash,\u201d said Biggar of Argus Research.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>US regional banks are expected to set aside more money to cover potential commercial real estate (CRE) losses and sell more property loans as the sector remains under pressure a year after the collapse of Silicon Valley Bank and Signature Bank.<\/p>\n","protected":false},"author":3,"featured_media":9149,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"Default","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[6105,1902,2690,611,1056,4368,4039,4950,1512,4369,279,4052,7401,2460,2144,1625,2511,5255,3,2369,3179,641,52,6027,1995,4537,6454,250,3330,697,2294,1823,1991,67,899,1401,187,2753,3404,900,4074,5527,6653,2859,34,2628,7403,393,3331,4593,5175,3138,3775,3689,3327,284,287,3729,7402,4620,6074,6106,6413,1358,380,255,6305],"class_list":["post-9148","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-other","tag-apartments","tag-bank","tag-banking-sector","tag-banks","tag-borrowing-costs","tag-bridge","tag-building","tag-buyers","tag-cash","tag-collapse","tag-comment","tag-commercial-real-estate","tag-commercial-real-estate-losses","tag-community","tag-consortium","tag-construction","tag-costs","tag-crisis","tag-cyprus","tag-data","tag-downside-risks","tag-earnings","tag-federal-reserve","tag-financial-crisis","tag-financial-stability","tag-financing","tag-first-quarter-earnings","tag-google","tag-google-news","tag-imf","tag-income","tag-increase","tag-industry","tag-inflation","tag-interest","tag-interest-rates","tag-international","tag-investment","tag-investors","tag-loan","tag-loans","tag-loss","tag-management","tag-managing-director","tag-markets","tag-money","tag-multifamily-loans","tag-new-york","tag-news","tag-office","tag-pandemic","tag-performance","tag-pressure","tag-private-equity","tag-properties","tag-property","tag-real-estate","tag-real-estate-investment","tag-regional-banks","tag-report","tag-research","tag-sales","tag-speed","tag-support","tag-us","tag-wall-street","tag-who"],"acf":{"keyphrase":"","keywords":"","sourceimg":"","country-category":""},"yoast_head":"<!-- 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