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US banks sink on concerns about office real estate loans
FirstpostShares of large and mid-sized US banks sharply underperformed the broader market on Wednesday with the S&P 500 Banks Index closing down 2.0 per cent while the benchmark S&P 500 Index fell 0.6 per cent with worries about commercial real estate loans in focus among bank investors. Investors worried about potential losses among banks from office real estate loans after comments from executives, including Wells Fargo & Co Chief Executive Officer Charlie Scharf and Blackstone President Jonathan Gray at a Sanford C Bernstein investor conference. Gray talked about “unprecedented weakness” in older office buildings while noting that this segment currently makes up less than 2 per cent of company’s equity portfolio in real estate. But Gray still estimated that “office buildings are about 3 per cent of the US banking system” so the size of losses, “relative to what happened in the housing market 15 years ago is dramatically different.” Rick Meckler, partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey, said “continued concern over loans made to the office market” hurt bank stocks broadly on Wednesday, citing the Wells Fargo comments.
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