Commercial Loans Failing at Rapid Pace By LINGLING WEI and MAURICE TAMMAN
U.S. banks have been charging off soured commercial mortgages at the fastest pace in nearly 20 years, according to an analysis by The Wall Street Journal. At that rate, losses on loans used to finance offices, shopping malls, hotels, apartments and other commercial property could reach about $30 billion by the end of 2009.
The losses by regional banks on their commercial real-estate loans will be among the most watched details as thousands of banks report second-quarter results over the next two weeks. Many of the most troubled banks have heavy exposure to commercial real estate. So far, 57 banks have failed this year.
Some bankers say they feel growing pressures from regulators to take losses on commercial real-estate exposure as a way of reducing the possibility of a catastrophic hit later.
Among other banks with notably low charge-offs: Based on the Journal study, annualized write-offs this year would be only 9% of all nonperforming commercial mortgages at a Wachovia Corp. unit in Charlotte, N.C. A spokeswoman at Wachovia declined to comment.
At New York Community Bank, a New York State-charted savings bank, that ratio would be a meager 2% in the first quarter. Ilene Angarola, director of investor relations at New York Community Bancorp., the bank holding company, credited the bank's strong underwriting standards. "Even though we have seen a decline in property values, our loan-to-value ratio is conservative enough that we haven't experienced anywhere near the degree of the charge-offs our peers have experienced," Ms. Angarola said.