The banking turmoil isn't over as regional lenders face risk of commercial-property credit losses, J.P. Morgan Asset strategist says
US regional banks have been at the center of the worst financial turmoil since the 2008 crisis, and their troubles are far from over, according to a JPMorgan Asset Management strategist.
The small and mid-sized regional banks remain"an area of concern" because of their increased lending exposure to the commercial real-estate sector, which is grappling with high vacancy rates and may come under stress, Jonathan Liang, JPMorgan Asset's head of Asia ex-Japan investment specialists, toldOver the last 12 to 18 months,"most of the bank lending that has occurred in America has come from US regionals and most of that lending has actually gone into commercial real...
"So this has gone to a lot of construction of suburban offices, which remain very vacant, the occupancy rate remains about maybe 50% pre-COVID. And so we think that in the coming year or two, there's going to be growing distress in this space, and that will also potentially amount to credit losses for those US regional banks," he added.
Nearly $450 billion in commercial real-estate debt is due to mature in 2023 - meaning a final payment on those loans are due, per data cited from Trepp by JPMorgan. Billionaire investor Howard Marks rang the alarm on commercial real estate this week in what he labels as"one of the biggest worries" US banks face today.
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