Small US Banks at Greatest Risk of Commercial Real Estate Losses: Fitch Ratings

Originally published on August 31, 2021, on MBA Newslink.

Fitch Ratings, Chicago, said the U.S. commercial real estate market will likely see deteriorating credit metrics once stimulus measures wind down and forbearance programs expire, with smaller CRE-concentrated banks more susceptible to elevated losses, which are expected to peak below levels seen in the past.

Fitch noted a “very high” correlation historically between U.S. bank failures and exposure to CRE lending. As of 2020, nearly 26% of FDIC-insured institutions had an elevated concentration of CRE loans; however, this remains below the 39% peak during the Great Recession. Since then, banks with assets of less than $100 million have decreased CRE exposure the most relative to the size of overall balance sheets.

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