No Escape From TARP For U.S. Banks Choking On Real Estate Loans

[Parsad]

Bloomberg article on regional banks and their CRE loan portfolios.  Of the 35 largest regional banks that retain TARP funds, CRE loans account for 30% of their portfolio on average, compared to 9.5% for large national lenders like Citi or Wells!  Cheers!

 

http://www.bloomberg.com/apps/news?pid=20601109&sid=aaoaOoxV9AmU&pos=10

[prevalou]

For Wells Fargo, CRE represents 17% of their loans, not 9%

[prevalou]

...and in 1990 CRE represented about 30% of their loans (during a very severe contraction in californian real estate)

[Parsad]

Thanks Prevalou!  I was just repeating what the article stated.  Cheers!

[ERICOPOLY]

I think it matters a lot what type of CRE loans we're talking about.  For example, I feel more comfortable with loans secured by apartments.  I feel uncomfortable about loans secured by shopping malls.

 

Wells has a nice pie chart on page 22 explaining their CRE portfolio allocation:

 

https://www.wellsfargo.com/pdf/invest_relations/presents/nov2009/baab_110609.pdf

[prevalou]

yes, I remember Reichardt tenets when making a commercial real estate loan: it is all about people, credit, real estate (old annuals reports from 1991). Loans have to be secured by a cash flow producing asset, with a margin of safety above the interest rate. It is the reason why Wells Fargo don't like very much construction loans.