A new report from Trepp has examined the ongoing situation of regional banking and finds that even as markets stabilize, commercial real estate lending remains vulnerable.
In early February, Trepp formed a list of 10 banks that had heavy commercial real estate loan concentration ratios, a measure of how much each financial institution's loan portfolio is concentrated in commercial and multifamily mortgages. The list ranged from Independent Bank Corp. at the bottom with 302% to New York Community Bancorp's Flagstar Bank subsidiary, at 477%. According to a GlobeSt.com review of Federal Reserve Bank data from September 30, 2023, eight out of the 10 banks are among the top hundred largest in the U.S.
In its latest report, the firm said that in some ways, things had improved since Silicon Valley Bank, First Republic Bank, and Signature Bank failed in 2023. The exposure to interest rate risk—holding bonds with low interest rates that lose significant value when rates climb—is broadly contained. Many banks have shortened the maturity of securities portfolios to reduce their sensitivity to rate changes.
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