The threat from a looming wave of maturing commercial real estate loans has been well telegraphed to investors, but it’s possible the metrics they are using to protect themselves from risk are flawed. Many investors have been avoiding bank stocks with high concentrations of commercial real estate (CRE) exposure. However, that metric may miss banks that have riskier loans on their books despite having lower concentrations of CRE. For that reason, investors may want to take a more granular look at the types of loans a bank holds. In doing so, they may find some larger banks are on shakier ground than their CRE concentration suggests. Wall of maturity About 30% of outstanding CRE debt is due to mature between 2024 and 2026, according to data provider Trepp. When this debt matures and the property owners look to refinance, borrowers will face much higher debt payments due to rising interest rates, and economics could become untenable, especially given that the value of many office properties has declined. Owners may decide it’s easier to just to hand back the keys and walk away. The heightened concern about default risk is clearly weighing on bank stocks, which are already fighting the headwinds of higher interest rates. Indeed, the gap between both the KBW Bank Index (up a …
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[mwai_chat context=”Let’s have a discussion about this article:nnThe threat from a looming wave of maturing commercial real estate loans has been well telegraphed to investors, but it’s possible the metrics they are using to protect themselves from risk are flawed. Many investors have been avoiding bank stocks with high concentrations of commercial real estate (CRE) exposure. However, that metric may miss banks that have riskier loans on their books despite having lower concentrations of CRE. For that reason, investors may want to take a more granular look at the types of loans a bank holds. In doing so, they may find some larger banks are on shakier ground than their CRE concentration suggests. Wall of maturity About 30% of outstanding CRE debt is due to mature between 2024 and 2026, according to data provider Trepp. When this debt matures and the property owners look to refinance, borrowers will face much higher debt payments due to rising interest rates, and economics could become untenable, especially given that the value of many office properties has declined. Owners may decide it’s easier to just to hand back the keys and walk away. The heightened concern about default risk is clearly weighing on bank stocks, which are already fighting the headwinds of higher interest rates. Indeed, the gap between both the KBW Bank Index (up a …nnDiscussion:nn” ai_name=”RocketNews AI: ” start_sentence=”Can I tell you more about this article?” text_input_placeholder=”Type ‘Yes'”]
