As of: March 27, 2024, 4:18 p.m
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The Creditreform rating agency has not yet given the all-clear on the real estate market for banks.
© Federico Gambarini / dpa
The office property market is still under severe pressure, according to new research from a rating agency.
A horror scenario cannot yet be completely ruled out.
Frankfurt - According to a study by the rating agency Creditreform Rating, the crisis in the office property market remains a source of danger for banks in the current year.
There will also be increased risks in 2024, especially for less broad-based specialist financiers with large financing portfolios in US office properties, explained Creditreform rating analyst Johannes Kühner on Wednesday.
The study shows that most of the institutions active in the commercial real estate business have so far proven to be resilient.
However, the dangers for the German banking sector should not be neglected.
Creditreform Rating is a subsidiary of the credit reporting agency Creditreform.
Investigation: Specialist financiers most at risk
Among other things, the rating agency examined how vulnerable individual German banks are to a sustained decline in the price of commercial real estate in the USA.
Their result: specialist financiers such as Aareal Bank and Deutsche Pfandbriefbank (pbb) are most at risk.
“The loans granted there for office properties amount to 152 percent (Aareal) and 145 percent (pbb) of the common equity core capital,” says the study.
Among the other banks, Helaba stands out, with a commitment of 44 percent.
High loan portfolios measured in terms of core capital make the institutions particularly vulnerable if the crisis worsens and access to capital buffers is necessary.
However, the price decline will be bearable for most institutions due to their lower exposure to the US office real estate market.
In 2023, Deutsche Pfandbriefbank devalued the properties it financed in major cities in the USA by almost a fifth.
It has made provisions of 259 million euros for these loans.
The risk provisions for loan defaults increased almost fivefold - the pre-tax profit collapsed to 90 (2022: 213) million euros.
Aareal Bank, which does around a quarter of its business in the USA, more than doubled its risk provisions to 441 million euros in 2023.
The institute also expects 2024 to be a challenging year.
This scenario would have more serious consequences for Germany
According to the Creditreform rating experts, the losses in value of office properties in Europe have so far been more moderate compared to the USA.
However, they warned that a price drop like in the US would cause much bigger problems for domestic banks.
Because the total office real estate loans in the bank's books amounted to many times the respective US values.
For many financial institutions, they would exceed 100 percent of the available common equity core capital.
The Association of German Pfandbrief Banks (vdp) now sees light at the end of the tunnel, at least for Germany.
He expects the real estate financing business to pick up slightly in 2024.
In the final quarter of 2023, more real estate loans were granted than in the same quarter of the previous year, it said.
This indicates that stabilization is beginning.
(Reuters, lf)