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October 25, 2014

Large Banks Chip Away at Commercial Real Estate Debt

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Large Banks Chip Away at Commercial Real Estate Debt

Large banks have made big strides in the last three years in selling and modifying their bad loans stemming from sour commercial real estate deals and now are even starting to pick up lending once again in the sector, The Wall Street Journal reports. 

At the end of the fourth quarter, large banks -- those considered to have at least $20 billion in assets -- reported delinquency rates on commercial real estate debt of 6.3 percent. That's down from 10.3 percent, a peak reached in the first quarter of 2010, Trepp LLC reports. 

“Banks still face choppy waters in the sector,” The Wall Street Journal reports. “Current delinquency rates are well above normal levels, and analysts say hundreds of billions of dollars of loans may be difficult to refinance in coming years. But the success by the larger banks at cleaning up their balance sheets signals a move toward stability in the broader property market.”

Larger lenders are also showing signs of increasing their lending too. In the last three months of 2011, banks increased their commercial mortgage holdings -- except for construction loans -- by more than $5 billion, the Federal Deposit Insurance Corp. reports.

Source: “Large Banks Cut Their Bad Loans,” The Wall Street Journal (March 21, 2012)

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