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CRE Bank Loan Performance Stable as Delinquencies Stay in Check
Trepp’s latest report on bank portfolio loan performance in commercial real estate, multifamily and construction, for the third quarter of 2019, shows that overall delinquencies are low and debt yield is steady.
The quarterly report is derived from the Trepp Anonymized Loan Level Repository (T-ALLR), and provides risk rating, 90-days-plus delinquency rates and other metrics for $168 billion in outstanding loan balances.
Debt yield on new-origination CRE loans is currently in the 10.5% range and has been steady for the past five quarters, after dropping from its peak of 12% in 2014. Multifamily debt yield is holding steady at 8.25% in the most recent quarters. In early 2013, it was nearly 10%.
Overall delinquency rates are low, with the Q3 reading at 0.04%, falling from Q2’s rate of 0.11%. In Q2 of last year, Trepp noted that construction loan delinquencies were 0.19%; they have since fallen to 0.05% in Q3. Construction loans account for 20% of all T-ALLR loans.
“Bank loans showing a low delinquency rate reflects the stability of the CRE market,” said VP Russell Hughes, who manages Trepp’s data consortia initiatives. “Though many are searching for signs of a recession, the delinquency data, often an early sign of stress in the market, does not indicate any issues at this point.”
Income-producing CRE is the largest segment, with $85 billion in active loans and a 90-plus delinquency rate of 0.06%. Multifamily loans, representing nearly a third of the loan population, had a 90-plus delinquency rate of 0.04%.
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