US regional banks to face increased scrutiny as CRE exposure stifles buybacks
==========
U.S. regional banks are expected to stockpile more funds and be conservative on stock buybacks due to losses from commercial real estate (CRE) loans. The banks face scrutiny from investors over potential weakness from CRE and commercial borrowers. Problems related to CRE loans at New York Community Bancorp and First Foundation have highlighted default risks. Analysts expect profits to decline as banks set aside more money to cover deteriorating loans and earn less from interest payments due to weak loan demand. The Federal Reserve Chair, Jerome Powell, stated that CRE risks will be with banks for years. Regional banks have also shifted toward making riskier loans, holding a larger share of non-investment grade corporate loans. The Fed projected total loan losses for banks to reach up to $571 billion under a severe scenario in its annual stress tests. The future path of U.S. interest rates has heightened uncertainty for lenders pursuing distressed sales of CRE assets. CRE property prices continued to decline at the end of the first quarter, and distressed CRE sales increased to 3.9% of total CRE sales. Shares of banks with big exposures to CRE and multi-family properties, particularly in New York and other major metropolitan areas, have been targeted by short sellers. The KBW Regional Banking Index has shed about 11% so far this year, while an index tracking larger lenders is up about 18%.
#UsRegionalBanks #CommercialRealEstate #CreExposure #StockBuybacks #LoanLosses #InterestRates #DistressedSales #ShortSellers
https://www.investing.com/news/economy-news/us-regional-banks-to-face-increased-scrutiny-as-cre-exposure-stifles-buybacks-3513649
Oddbean new post about login | logout