Monday, Jul 06, 2009
Catch 22
FT: UK banks’ reluctance to clean up GBP 250bn commercial property exposure fuelling fears of continued lending freeze
Banks don't want to offload distressed assets at 40p in the pound, and they can't revitalise the market with fresh loans until they do so. Currently they are pushing back maturities and there is fear about the ability to rollover in 2011/2012 . "The trouble is that with more than half the debt maturing in the next three years, and new lending terms requiring LTV ratios of around 60%, there is not enough money in the system to refinance the loans."
Posted by stillthinking @ 04:08 PM (653 views) Add Comment
2 Comments
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1. paul said...
Oh looks like we'll just have to print more money to throw at them then.
2. bellwether said...
Rental income on commercial property has yet to reduce significantly. If the economy continues to deteriorate, as seems likely, then the income from commercial property will really sieze up and even 50p in the £ may represent overpayment ie vulture funds may be being saved from themselves. The banks determination to hang on is based on a comparison with what happened to prices in the 1990's, but the situations are entirely different. Long term the banks decision to not address may be a grave mistake. I'll be interested to see what RBS do given Hester's statements about their loan book.
If banks were to take a haircut on assets then Paul is right the governent would bail out, but what % of say RBS would the govt want - and would that matter - the taxpayer may be the majority shareholder in RBS but RBS continues to operate without any real state involvement.
Also the UK maybe far less able to bail out in a couple of years by which time the governments own fiscal irresponsibilty will be coming home to roost.