Banks are starting to feel the effects of distress in the multifamily sector with the volume of multifamily loans that were at least 30 days past due or in nonaccrual status in the fourth quarter rising to $3.46 billion, up 43.1% from the previous quarter and an 81.2% increase year over year, according to S&P Global Market Intelligence. That was the highest total since the second quarter of 2013, when delinquent multifamily loans stood at $3.71 billion.

Net charge-offs on multifamily loans at US banks also rose in the 2023 fourth quarter to 0.11% of average loans, compared to 0.03% in the third quarter and 0.02% a year earlier, S&P Global said, also reporting that the fourth-quarter delinquency rate was up from 0.4% in the third quarter and 0.3% a year earlier.

Citigroup, M&T Bank and Citizens Financial Group had the highest delinquency ratios on multifamily loans among the top US bank lenders in the sector, and all reported delinquency rates that were higher than a year earlier. However net charge-offs remained stable in all three banks' portfolios.