These banks have high exposure to loans secured by office properties — here's how their stocks have performed

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KBW provides an update on commercial real estate problems and loan-loss expectations.

Investors are right to be worried about declining values for office buildings. We appear to be at the start of a long transition for many cities, after the COVID-19 pandemic made clear that for many types of work, people don’t need to suffer through long daily commutes to be effective in their jobs.

Below is a list of 17 U.S. banks that analysts at Keefe, Bruyette & Woods estimate have exposure to loans secured by office buildings of 10% or more of total loans. On March 7, he said KBW expected a 30% to 40% decline in CRE lending volume during a five-quarter period through the end of 2023. In the update, he cited comments from four CRE loan brokers, who “reported capital markets declines of 47% .”

Keeping in mind that commercial real-estate loans may not have been originated with very high loan-to-value ratios, and that there is considerable value left in the collateral in the event of foreclosure, one cannot assume that ultimate losses will come close to the collateral value declines or to the percentage of problem loans.

 

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