Overlooked Success: US Banks’ Resilient CRE Holdings

Is there cause for concern in CRE collateral? Absolutely. It’s a cyclical product, no surprise there. We’ve been on an appreciation tear for a long time.

In a world focused on clicks and views, what’s your personal cost reading daily negative news?

Take pause and appreciate the stress test resilience displayed by US banks in managing their CRE portfolios.

Take a second to see the flower amidst the pavement.

3 Take-Aways from Reuters

  1. “CRE values in all sectors are expected to soften as economic activity decelerates, hurting banks, which hold about half of the $6 trillion in outstanding CRE debt and the largest share maturing in 2023-2026, Moody’s Investors Service said this month.”
  2. “The 23 banks examined hold approximately 20% of office and downtown retail CRE loans, and showed they could weather a major CRE downturn.”
  3. “The average projected CRE loan loss rate across the group was 8.8% of average loan balances, compared with 9.8% last year, the Fed said.”

Some might not agree seeing the upside of the benefits, concluding that collateral protection is limited to a realistic view rooted only in objective facts and rational analysis. Debating what’s the best lens – realism, optimism or pessimism is a time waster. Choosing “prudent optimism” always wins the long run game.

Double down on TITOS

Changing your lens to TITOS (not the vodka) but “Train In The Off-Season” attitude will better position your bank and appraisal firm.

Off-season training unlocks untapped productivity. Athletes, like professionals, invest in honing skills, confronting vulnerabilities and cultivating a distinct competitive advantage. By embracing the off-season as a training ground, they enhance performance, transcend limitations and position themselves for remarkable success.

Harness the power of deliberate practice during the off-season, emerging stronger, faster and more resilient. It’s this untapped potential lies the secret to moving the needle for your department or firm.

Having a scarcity mindset and cutting expenses everywhere is very expensive long term. It feels like that’s what you “should do”, but it’s short sighted. Using old technology, avoiding leadership training, not investing in your people (or worse letting them go) will create significant friction in your bank or firm when the market rebounds.

Future Growth Positioning

Economic downturns are temporary and markets eventually recover. By investing in your people, technology and process during tough times, you position yourself for future growth and prosperity when the economy rebounds.

When the upturn arrives, you’ll be better equipped to meet increased appraisal volume, crush your metrics and capitalize on emerging opportunities.

Better than expected.

Train in the off-season.

See the flowers in the pavement.

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