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The Institutional Risk Analyst

© 2003-2024 | Whalen Global Advisors LLC  All Rights Reserved in All Media |  ISSN 2692-1812 

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What Does PNC Financial Say About Commercial Real Estate?

December 12, 2023 | 両替料 | For some time we’ve been meaning to return to PNC Financial (PNC), the eighth largest bank in the US right behind U.S. Bancorp (USB) at just over $600 billion in assets. When we looked at PNC back in January of 2023 (“Update: Truist, Charles Schwab, U.S. Bancorp & PNC Financial”), the bank’s credit profile was pristine. Yet by October 2023, PNC reported its non-performing commercial real estate (CRE) loan balance more than doubled to $723 million in the third quarter from $350 million in the second quarter. PNC stated during their conference call:

"While overall credit quality remains strong across our portfolio, the pressures we anticipated within the commercial real estate office sector have begun to materialize. Non-performing loans increased $210 million, or 11%, linked quarter. The increase was driven by multi-tenant office, CRE, which increased $373 million, but was partially offset by a decline of $163 million in non-CRE NPLs."

Reading the latest comment from Bill Moreland at BankRegData, it seems that the carnage in commercial real estate is starting to bleed through into bank public disclosure and soon earnings. What does PNC tell us now about commercial loan exposures in 2024 and beyond? The chart below shows loss given default (LGD) for the $500 billion in bank owned multifamily commercial mortgages.

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