Delinquencies on commercial real estate loans at US banks surged in the fourth quarter in a challenging macroeconomic environment, lower occupancy rates and tightening lending standards.
Loans overdue by 30 days or more and overdue loans S&P Global Market Intelligence analysis showed that 0.65% of CRE loans were in non-accrual status at the end of the fourth quarter, with a delinquency rate of 0.58% as of September 30, 2022.
However, the CRE loan delinquency rate declined 6 bps year-over-year, despite the continued increase in delinquency rates in the fourth quarter.
At its last meeting, the Federal Reserve Board Raised Concerns over the CRE space given higher interest rates, including higher valuations in the commercial real estate market.
Additionally, banks tightened lending standards for commercial and industrial loans and commercial real estate loans in the third and fourth quarters, according to the Fed’s monetary policy. report.
S&P Intelligence Unit found The number of U.S. banks that exceeded regulatory guidance on concentration of CRE loans in the fourth quarter increased from 539 at the end of the third quarter and 421 in the fourth quarter of 2021 to 567 as of December 31, 2022 . This is the seventh consecutive quarter of increase.
Trustmark National Bank (a division of Trustmark)TRMK) is the latest major US bank to exceed CRE guidance with a concentration of 106% in construction and development financing as of December 31, 2022.
Meanwhile, Wells Fargo downgraded its commercial mortgage-backed securities rating to neutral from favorable. “However, a light issuance in CMBS by the first half of 2023 should support a neutral rating.”
Related tickers include Starwood Property Trust (STWDMore), Blackstone Mortgage Trust (BXMTMore), Brightspire Capital (BRSP), ACRES Commercial Real Estate (ACR), Lument Finance Trust (LFT), ladder capital (LADR) among others.
Previously, Blackstone (BX) defaulted on some of the bonds backed by Finnish commercial portfolio.
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