The current woes in the commercial real estate sector have caused a sharp decline in local bank stocks, bringing back memories of the infamous bank in investors' minds. silicon valley bank downfall.
what happened: The KBW Nasdaq Regional Bank Index suffered its deepest decline since March, falling 6%. This recession was mainly caused by New York Community Bancorp, Inc. new york cbBusiness Insider reported on Wednesday that it fell nearly 40% after suffering a $260 million loss in the fourth quarter due to bad debt on commercial real estate loans.
Losses in the US real estate market also led to a 20% decline. Agora Co., Ltd. API Bank stocks based in Tokyo, Deutsche Bank AG D.B. The company quadrupled its reserves to $123 million to protect against future losses. New York Bancorp also set aside a significant portion of its $552 million reserve for its commercial real estate holdings.
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The problems facing these local banks reflect the woes of the U.S. commercial real estate sector, where $2.2 trillion in debt is coming due in 2027. A combination of reduced demand for office space due to the pandemic and high interest rates has left landlords struggling for cash. Loan repayment. This situation poses a serious threat to US banks, especially small banks.
Why it's important: Local banks etc. Amerant Bancorp Co., Ltd. AMTB and Fidelity D&D Bancorp Co., Ltd. FDBCare more vulnerable to the commercial real estate sector than larger institutions such as . JPMorgan Chase & Co. J.P.M.. They do not have the ability to offset losses from their extensive credit card portfolio or investment banking sector. This pressure on real estate loans has motivated financial institutions to exit the market, with some banks offloading their real estate loan portfolios to minimize their exposure to the real estate sector.
US office buildings are bracing for a $117 billion debt cliff caused by rising interest rates. The problem was compounded by his warning that within the next two years he could face a wave of defaults on commercial real estate loans that could reach $1 trillion. This situation could result in a highly volatile market for local banks, which are currently bearing the brunt of the ongoing real estate crisis.
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