Bank Growth Spurred by Commercial Real Estate Lending
Commercial real estate loans and securities contributed $46.5 billion to the growth in FDIC-insured banks and savings and loans in the third quarter 2015 from mid-year to $15.89 trillion, CoStar said in the report.
CoStar noted that the largest gains in commercial real estate lending came from nonfarm nonresidential real estate loans, which were up $23.8 billion, or 2% for the quarter. Multifamily residential real estate loans increased $13.9 billion, or 4.4%, and real estate construction and development loans were up $10.3 billion, or 4%, the report said.
Despite the positive quarterly results, FDIC chairman Martin J. Gruenberg urged banks to pay attention to signs of growing interest-rate risk and credit risk, noting that the industry was in the “phase of the credit cycle when lending decisions are made that could lead to future losses.”
“Timely attention by banks to address these growing risks will benefit banks and contribute to the sustainability of the current economic expansion.” Gruenberg said.
Investment securities at banks rose by $25.9 billion, or 0.8%, with most of the growth coming from an increase in mortgage-backed securities, which rose $31.2 billion, or 1.7%, CoStar said in the report.
Total commercial real estate loans at all commercial banks and savings institutions now stands at $1.8 trillion, in comparison to a total of $1.63 trillion in commercial real estate loans at the mid-year 2007 peak of the commercial real estate market, according to the report.
Delinquent commercial real estate loans total dropped for the 21st consecutive quarter. Total delinquent commercial real estate loan balances stood at $20.96 billion, down 6.6% , the news report said.
Total dollar volume of foreclosed commercial real estate properties held by banks was $9.45 billion at third quarter 2015 end, a decline of 10% from the second quarter, CoStar said, noting that 55% of the $9.45 billion was on construction and development properties.
Aggregate net income for FDIC-insured institutions stood at $40.4 billion at the end of September 2015, a drop from the $43 billion reported at the end of June 2015, CoStar said.
Nearly 60 percent (58.9%) of the 6,270 insured institutions reporting third quarter financial results noted year-over-year growth in quarterly earnings, slightly less than in the previous quarter.
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