Dumb & dangerous (small) banks
About two dozen banks in the US had portfolios of commercial real estate loans in late 2023 that federal regulators indicated would merit greater scrutiny, a sign more lenders may face pressure from authorities to bolster reserves.
A trio of regulators publicly warned the industry last year to carefully assess any large exposures to debt on office buildings, retail storefronts and other commercial properties. At the time, authorities said they would pay closer attention to banks that rapidly piled up such loans worth more than three times their total capital.
While New York Community Bancorp, which set off a cascade of stock drops in recent weeks as it braced for potential loan losses, was the biggest US bank that came close to fitting the regulators’ criteria, many smaller lenders went further. That’s because they amassed outsize concentrations even faster, according to a Bloomberg analysis of federal data from more than 350 bank holding companies.
Bloomberg’s review found 22 banks with $10 billion to $100 billion of assets hold commercial property loans three times greater than their capital. Half of those firms had growth rates surpassing the thresholds laid out by regulators. The tally was even higher among banks with less than $10 billion of assets: 47 had outsize portfolios, of which 13 had swelled rapidly. The analysis excludes loans for nonresidential buildings that are occupied by their owners.
Source: Bloomberg