Banks Edge Back Into Investment Property Lending

Via Co-Star Newsletter
Focus Is Still on Multifamily, and on Core Markets and Borrowers
By Mark Heschmeyer
March 6, 2013

CRE at NAI with Sean Dreznin

CRE at NAI with Sean Dreznin

After tentatively testing the water in 2011, banks increased their overall lending for commercial real estate in 2012 with total CRE loan balances outstanding at year-end up 3% year-over-year. Investment property loans outstanding showed the biggest gain, ending 2012 up 11% from 2011. And multifamily loans outstanding were up 7% year-over-year.

Banks also continued to shrink their loan exposure in areas that caused the biggest problems during the Great Recession. Construction and development loans outstanding ended down 16% year-over-year.

Still, a great deal of disparity exists between which banks are lending again and which borrowers and markets are benefitting.

“Larger institutions have historically been significantly under-allocated to CRE relative to the banking universe,” said Matthew Seminerio, a financial analyst for CoStar Group’s Property and Portfolio Research (PPR). “The largest banks (those with more than $50 billion in assets) are down 0.4% year-over-year, while banks with $10 billion to $50 billion in assets are up 7%. Smaller institutions are down even more. Banks with $1 billion to $10 billion were down 0.3%, and those with less than $1 billion, down 4.5%.”

“However, the larger banks are better positioned from a balance sheet perspective, and thus have also been able to take more writedowns,” Seminerio said. “For example, if you remove the impact of construction loans, the more than $50 billion change is actually up 3.6%, vs. 9.6%, 1.6%, and -3.1% for the other three categories, respectively.”

Here is how CRE lending for the six largest banks fared in 2012.

Bank — % Change in CRE Lending YoY (excluding construction & development)

PNC Bank — 15.02%

JPMorgan Chase Bank — 13.36%

Bank of America — 9.32%

U.S. Bank — 2.44%

Branch Banking and Trust Co. — 1.56%

Wells Fargo Bank — 1.45%

Pittsburgh-based PNC’s 2012 numbers include its acquisition of more than 400 branches across six Southeastern states from RBC Bank (USA) last year. This was PNC’s seventh acquisition in the past eight years.

For banks in the $10 billion to $50 billion asset range, here is how the six fared that had the largest amount of CRE loans on their books at year-end.

Bank — % Change in CRE Lending YoY (excluding construction & development)

People’s United Bank — 769.15%

Signature Bank — 39.81%

New York Community Bank — 6.14%

Synovus Bank — 2.87%

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Filed under Commericial Real Estate Articles & News, Investment Real Estate

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