US banks have begun selling off property loans at a discount as they attempt to reduce exposure to the commercial real estate market.
The willingness of some lenders to take losses on so-called performing real estate loans follows multiple warnings that the asset class is the “next shoe to drop” after the recent turmoil in the US regional banking industry.
HSBC USA is in the process of selling off hundreds of millions of dollars of commercial real estate loans, potentially at a discount, while PacWest sold off $2.6bn of development loans at a loss.
Citizens, which has been reducing its commercial property lending, more than doubled its stock of loans available for sale to $1.8bn during the first quarter.
Customers Bancorp, based in suburban Philadelphia, cut its commercial real estate lending by nearly $25mn in the first quarter. It also recategorised $16mn of these loans as “held for sale”, up from zero in the previous quarter.
