Large UK banks are more resilient to a weakening commercial real estate market than they were in 2008 because of their shrinking exposure to the sector, according to research by Moody’s Investors Service.
The six biggest UK banks have cut their lending to CRE by 40% since the end of 2010 to £84.6bn in June 2016.
Only 4.7% of their total lending targeted the industry.
RBS had the biggest gross exposure at the end of June 2016, with 7.6% of its loan book in CRE.
Nationwide was at the other end of the spectrum, with only 1.7% of its loan portfolio in CRE at the end of April, a fall of 2.9 percentage points since 2013.
CRE loan portfolios as a proportion of tier-one capital have also fallen across the six banks.
Santander’s exposure to the market represented 94% of its tier-one capital, down from 112% in 2013. Lloyds’ exposure was 59%, down from 100% in the same period, while Barclays moved from 27% to 26%.
The ratings agency said that although UK CRE experienced a slowdown following the referendum, particularly because of the continued suspension of open-ended funds, it did not expect values to fall as much as they did during the global financial crisis.
Recent figures from MSCI and CBRE showed that capital values in July had taken the biggest hit since the financial crisis.
Moody’s said it expected an average fall of 10% in value, compared with the 45% fall experienced last time.
It added that it did not foresee a recession in the UK economy.
From 16 August: Capital values down 2.8% >>
From 13 August: City offices lead post-Brexit value decline >>
From 20 June: Bank lending to property developers falls 54% >>
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