NEW YORK - Big U.S. banks survived a hypothetical 40% drop in commercial real estate values as a part of the U.S. Federal Reserve's annual health test, easing fears about the banking sector as landlords struggle in a higher-for-longer interest rate world.
The results, released on Wednesday by the Fed, examine whether banks would be able to continue lending to households and businesses in the event of a severe global recession. They also indicate the amount of capital banks need to be considered healthy - and how much they can return to shareholders through dividends and buybacks.
Commercial office space is being closely watched as $929 billion of the $4.7 trillion of outstanding commercial mortgages held by lenders and investors will come due in 2024, according to the Mortgage Bankers Association. This looming maturity wall comes against a backdrop of declining property values and lower rent rolls.Analysts predict a painful reckoning for CRE, with banks still retaining "considerable concentration risks," according to Moody's Ratings.
Prices for services pushed the annual rate of inflation up to 2.9 per cent in May, according to Statistics Canada.Dividend stocks like Fortis Inc can be great additions to a well-diversified portfolio. The post RRSP Wealth: 2 Great Dividend Stocks to Own for Total Returns appeared first on The Motley Fool Canada.Still, it expects the central bank to pick up the pace of rate cutting in 2025, with the benchmark rate reaching 2.75% by the end of next year.