Oct 18 - A number of U.S. banks saw continued pain in the third quarter on delinquent commercial real estate loans in their portfolios, as stress in the sector persists.
"This is going to go on for at least a year, where NPLs continue to rise, followed by charge-offs - it's going to be really ugly," said Rebel Cole, a finance professor at Florida Atlantic University. Other banks' earnings in the past week showed similar challenges facing CRE holdings. On Tuesday, Goldman Sachs disclosed that it had reduced its exposure to office-related CRE holdings by roughly 50% this year.
Regulators have kept a close eye on banks' CRE risk. While bigger banks such as JPMorgan and Goldman Sachs have relatively less exposure to CRE, smaller regional banks have greater exposure that have posed challenges, according to research from JPMorgan and Citigroup. Wells Fargo saw an increase in net charge-offs on its CRE portfolio compared to previous quarters. On Oct. 13, the bank reported $93 million in net CRE loan charge-offs, compared with $79 million in the second quarter and $17 million in the first.
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