NEW YORK--(Business Wire)--
Regional mid-size and smaller banking institutions have greater credit risks
associated with declines in commercial real estate portfolio performance with
downgrades likely for some of these banks, according to a Fitch Ratings review.
For the U.S. banking sector overall, CRE exposure remains a sizable but
generally manageable risk, particularly among the largest financial
institutions.
As of June 30, 2009, U.S. banks had approximately $1.1 trillion of CRE loans,
roughly half of which were held by banks in Fitch's rated universe. Fitch
estimates that 10% of this balance is exposed to potential impairment. These
figures do not include the approximately $500 billion in construction loans,
including residential construction, that are subject to even greater risk. For
the 36 banks rated by Fitch with less than $20 billion in assets, CRE exposures
represent more than one-quarter of total loans outstanding. None of the four
largest US-based banks (assets in excess of $1 trillion) have CRE in excess of
10% of total loans.
'The potential for further deteriorations in commercial real estate portfolios
is a major contributor to Fitch's negative outlook for the banking sector,' said
Thomas Abruzzo, Managing Director and co-head of Fitch's North America Financial
Institutions group. 'Loan losses are increasingly likely given the expectation
for ongoing declines in commercial real estate markets.'
Fitch expects that rating actions taken as a result of its CRE review will be
concentrated among the smaller and mid-size banks. The magnitude of negative
rating actions is likely to be no more than a notch, but the possibility of more
significant downgrades is quite possible among the banks with the greatest
exposure.
In August 2009, Fitch initiated an expanded review of CRE exposures for banking
and thrift institutions in Fitch's ratings portfolio, beginning with a survey
aimed at obtaining detailed data on the CRE portfolios of companies rated by
Fitch. The information gained from the CRE survey provides a framework for Fitch
to examine specific areas of concern across the banking industry, conduct more
uniform stress tests and assess if rating actions are needed to reflect what
will likely be continued deterioration in asset quality.
The full report 'U.S. Bank CRE Exposure Review' is available on the Fitch
Ratings' web site at 'www.fitchratings.com.' The report provides additional
details regarding Fitch's survey methodology and approach to stress tests
related to CRE exposure.
Additional information is available at 'www.fitchratings.com'.
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS.
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:
HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING
DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S
PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE
AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF
CONDUCT' SECTION OF THIS SITE.
Fitch Ratings
Thomas Abruzzo, 212-908-0793, New York
James Moss, 312-368-3213, Chicago
or
Media Relations:
Brian Bertsch, 212-908-0549, New York
Email: brian.bertsch@fitchratings.com
Copyright Business Wire 2009
