Time passes and the news about bank CRE loans becomes worse. Credit quality has been dropping and many larger banks have bad operational risk management.
Trepp has released more about criticized bank loan trends in the first quarter of 2024, adding further depth to the discussions. The firm tracks key performance metrics for CRE loans and "standardizes banks' internal loan risk ratings," creating ratings of one through nine. If the figure is six or more it shows a heightened risk of fault or loss. That doesn't mean there will be problems, they're just more likely to happen.
It's unlikely to be a surprise that there was a spike in criticized office loans during Q1. New York City currently sits at 44.5%, up from 33.5% last year. One possible reason is the large amount of older office stock that lacks the amenities many office tenants want — a prime example of the bifurcated state of the market.
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