Fitch says midsize and smaller regional banks at highest risk for downgrade from CRE exposure
Fitch Ratings expects rating actions taken as a result of a new review of commercial real estate exposures will be concentrated among the midsized regional and smaller US banks.
In most cases, rating actions will likely be limited to one notch, but more significant downgrades are quite possible among the banks with the greatest exposure.
Key findings of U.S. Bank CRE Exposure Review
- Potential aggregate impairments under Fitch’s base scenario range between $120bn and $140bn for Fitch-rated banks and thrifts.
- These ranges would equate to a potential loss rate of between 11% and 24% of total CRE loans held by companies rated by Fitch.
- Based on figures as of June 30, 2009, in aggregate, Fitch’s base projected losses represent approximately 13% of equity and 11% of equity plus reserves.
- Despite significant writedowns to date, CLD loans remain areas of primary concern.
(See also Deutsche Bank’s analysis of smaller banks’ CRE exposure at FTAlphaville.)
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