Concerns that banks could be overwhelmed by CRE loan defaults could be largely unnecessary, according to what S&P Global Market Intelligence is hearing from banks.
"Concerns about future defaults center on office buildings, which have been affected by home working trends. Some banks moved their loss coverage ratios for office loans into the high-single-digit percentages. PNC Financial Services Group Inc., for example, said its 7.4% allowance means it is 'reserved for whatever happens,'" the firm wrote.
Between 2017 and 2019, the average portion of total CRE loans that were delinquent was 0.57%, according to S&P Global. At the peak of the pandemic, in the fourth quarter of 2020, it was 1.02%.
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