NatWest Group has said it saw “muted” demand for borrowing in the commercial real estate market last year as it looked to lessen its exposure.
The group – which last year sold a portfolio of distressed loans made against shopping centres – said in its annual report, published today, that ongoing moves to reduce its real estate exposure had taken place alongside “muted” customer appetite for borrowing, “particularly amongst larger customers”.
“At a subsector level, the residential market had a positive out-turn over the year; the retail sector exhibited mixed performance in line with changing consumer habits; the industrial market performed very strongly; with uncertainty continuing in the office subsector as occupiers moved to a more flexible way of working,” the group’s report added.
The bank said most defaults last year were in the retail sector, “particularly in the fashion-led shopping centre subsector”.
Outside of retail there was limited distress, the group said, but added: “Uncertainty still remains, particularly in relation to the office subsector, and the portfolio continues to be actively reviewed and managed.”
At the end of the year, the largest chunk of the bank’s CRE exposure was in UK residential investment, at £4.8bn. Exposure across each asset class and geography was lower than a year earlier.
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