Hundreds of US banks have exceeded regulatory guidelines on commercial real estate loan concentrations, according to a new report.
A total of 576 banks are now overexposed, representing an increase of 30% compared to one year ago, says S&P Global Market Intelligence.
The increased exposure comes at a time when commercial real estate loan delinquencies are on the rise.
In Q1 of 2023, commercial real estate loan delinquencies rose 12 basis points to 0.77%, which S&P analysts characterize as a sharp rise in a small time frame.
“The delinquency rate on nonowner-occupied nonresidential property loans has increased for the past three quarters, with the 24 basis point rise in the latest quarter being the largest sequentially since the 20 basis point rise in the fourth quarter of 2020.
Investors come under increased scrutiny of loans tied to office buildings, and banks are exercising caution over CRE loans, which could increase stress on borrowers and pressure policymakers to intervene.”
The commercial real estate market remains under significant pressure due in large part to an office space exodus, as large swaths of workers continue to work at home for part or full time.
US regulators use a three-pronged test to determine whether a bank has too much exposure to the commercial real estate market.
The first is when a bank has construction loans with at least 100% of risk-based capital.
The second is when a bank has commercial real estate loans with at least 300% of risk-based capital levels.
And the third is when a bank has recorded a 50% growth in commercial real estate loans in the last 36 months.
Follow us on X, Facebook and TelegramDon't Miss a Beat – Subscribe to get email alerts delivered directly to your inbox
Check Price Action
Surf The Daily Hodl Mix
Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any losses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.
Generated Image: Midjourney
