Banks are finally admitting they have a problem with billions of dollars in looming real-estate defaults
The rapidly growing reserves reflect concerns about the health of commercial-real-estate debt.This earnings season,by raking in record revenues and surpassing Wall Street expectations.
The US's four largest banks, Wells Fargo, JPMorgan Chase, Bank of America, and Citibank, together now have $62.9 billion of such loss provisions, according to the debt-tracking firm Trepp's analysis of their recent first-quarter financial statements.Some of the uptick is attributable to expected losses connected to commercial real estate.
Wells Fargo, JPMorgan Chase, and Bank of America are the nation's largest commercial-real-estate lenders in that order, and Citibank is the 16th biggest,"We're only in the early stages of a real-estate downturn, and we're starting to see a meaningful increase in loan-loss reserves," Matthew Anderson, a managing director at Trepp, said."Unlike other cycles, where the market dipped and then began to recover, this is something that could continue for years.
Keenan suggested that the company's provisioning could continue to rise. Thirteen percent of its office loans are due to mature in 2023, and 7% of its loan book, totaling roughly $1.7 billion in debt, is connected to office assets that Keenan identified as having an elevated risk of sustaining losses.Blackstone Mortgage Trust's reserves amount to about 1.5% of its portfolio, which the company's chief financial officer described as in line with banking peers.
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