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'Bank Failures Are Almost Certain To Follow': The CRE Crisis Has Gone Nowhere...

'Bank Failures Are Almost Certain To Follow': The CRE Crisis Has Gone Nowhere...
Tyler Durden's Photo
Authored by Mate Suto and Tuomas Malinen via GnS Economics Substack,

Commercial real estate (CRE) issues have been getting more attention this year, causing significant headaches for the banking sector and raising questions about the severity of the situation. Rising vacancy rates, the short maturity of loans, and the loans made during low-interest periods have all contributed to escalating the current predicament. We have written about this several times, and now we aim to explore the problem through the lens of bank balance sheets to determine which ones really suffer under this issue.

To begin with, CRE loans are occupying a large portion of the U.S. banking sector’s entire portfolio (Total Assets), standing at a significant 10%. CRE loans are also regarded as the most widely held loan type among banks, which is confirmed by the fact that the majority of banks (99%) have positive CRE loans. Basically, almost every bank in the U.S. is holding some type of CRE loan on their balance sheets. Therefore, it is no surprise that this is an area warranting close observation, especially because the risks posed by CRE exposure spread quite unevenly between large and small banks.

Figure 1 illustrates the average CRE concentration for banks based on their size, as a share of loans.

See full article here: https://www.zerohedge.com/markets/bank-failures-are-almost-certain-follow-cre-crisis-has-gone-nowhere?utm_source=daily_newsletter&utm_medium=email&utm_campaign=2935