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Next Headache: Failing Commercial Loans

Posted By Barry Ritholtz On July 20, 2009 @ 9:15 am In Credit | Comments Disabled

To review: Over the past 5 years, we have witnessed rpoblems develop and than expand in mortgages, credit card receivables, auto loans, and related vehicvles (RVs, Boats, Motorcycles)

The latest headache: Commercial Loans:

U.S. banks have been charging off soured commercial mortgages at the fastest pace in nearly 20 years, according to an analysis by The Wall Street Journal. At that rate, losses on loans used to finance offices, shopping malls, hotels, apartments and other commercial property could reach about $30 billion by the end of 2009.

The losses by regional banks on their commercial real-estate loans will be among the most watched details as thousands of banks report second-quarter results over the next two weeks. Many of the most troubled banks have heavy exposure to commercial real estate. So far, 57 banks have failed this year.

The $30 billion estimate is based on financial reports filed by more than 8,000 banks for the first quarter. The trend continued as a handful of major banks reported second-quarter results, including Goldman Sachs Group Inc., J.P. Morgan Chase & Co. and Bank of America Corp. Regional banks tend to have higher exposure to commercial real estate than these big financial institutions.

Given the cutback in consumer spending and the number of failing retail outlets, this should comes as no surprise. Core Retail sales have been awful, making new lows — no greenshoots here.  I’ll see if I can dig up a good chart on this later . . .


cali-comm-re-48136830 [1]See also:
Commercial brokers are swimming in empty space [2]
Roger Vincent
Los Angeles Times, July 19, 2009


Commercial Loans Failing at Rapid Pace [3]
WSJ, July 20, 2009


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URL to article: http://www.ritholtz.com/blog/2009/07/next-headache-failing-commercial-loans/

URLs in this post:

[1] Image: http://www.ritholtz.com/blog/wp-content/uploads/2009/07/cali-comm-re-48136830.gif

[2] Commercial brokers are swimming in empty space: http://www.latimes.com/business/la-fi-cover-brokers19-2009jul19,0,2255936.story

[3] Commercial Loans Failing at Rapid Pace: http://online.wsj.com/article/SB124804759792663783.html

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