Commercial real estate mess hits regional bank bonds
Wednesday, July 29, 2009
Source: Reuters
Reuters reports: The corporate bond market is signaling trouble ahead for those U.S. regional banks that are facing rising loan losses from commercial real estate.
U.S. bank bonds have rallied broadly since March, when the market was awash with fears for the financial system.
But while investors are increasingly confident that big banks can survive an extended downturn, they are worried about the next tide of toxic loans that threatens to inundate an already floundering economy.
Bonds of some U.S. regional banks with big commercial real estate exposure reflect this concern, analysts said. For example, the bonds of Birmingham, Alabama-based Regions Financial Corp (RF.N) have dropped about 17 percent in price since late March.
This week's data suggested a bottom in the housing market is in sight, with a report on Tuesday showing U.S. home prices rose in May for the first time in three years.
Yet analysts fear that much of the drama in the commercial real estate market has yet to unfold.
U.S. commercial real estate prices, which have fallen about 35 percent from their peak in October 2007, are a major driver of banks' loan losses.
About $2.2 trillion of U.S. commercial properties bought or refinanced since early 2004 have fallen below the price at which they changed hands, according to a report by Real Capital Analytics, a research firm based in New York.
View the full article on Reuters: Commercial real estate mess hits regional bank bonds
Posted by: Nina Turner