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interestrateripoff

Banks Set For Losses As Clock Ticks On £300bn Commercial Property Loans

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http://business.timesonline.co.uk/tol/busi...icle6728251.ece

Banks could be heading for a second wave of big losses as financial institutions begin to tackle the crippling legacy of £300 billion in lending to the UK commercial property sector.

British banks are expected to follow their American counterparts, which are already having to bite the bullet on commercial real estate losses.

A collapse in values of more than 40 per cent in less than two years means that almost every British commercial property loan granted since 2004 is under water, according to Savills, the estate agency.

This gloomy forecast was reinforced by another report that confidence in global commercial property markets has deteriorated in the past three months as rents — regarded as a key property market indicator — dropped by the steepest amount on record.

The Royal Institution of Chartered Surveyors said that — despite a slower pace of decline in prices and a surge of interest from investors hoping to mop up cheaper assets — the outlook on rents remained depressed.

Almost three quarters of surveyors said that rents were falling. The percentage reporting a fall, rather than a rise, went up from 66 per cent in the previous quarter to 71 per cent in the past three months.

The rout in the commercial property sector has hit American banks. Last week, Ben Bernanke, Chairman of the Federal Reserve, acknowledged “the very real risk on the side of foreclosures and the problem of commercial real estateâ€. As he spoke, US banks, including Morgan Stanley and Wells Fargo, announced poor results because of real estate problems.

Wells, which inherited the mortgage book of Wachovia when it took over the troubled bank in December, announced a surge in profits and revenues but its share price dived as it admitted that non-performing commercial property loans had risen by 65 per cent.

Key Corp, another big US deposit taker, which revealed a quarterly loss last week, said that it had $1.2 billion (£730 million) in non-performing commercial property loans.

“They [American banks] are pretending that everything is OK and are extending the maturity of loans. Banks can only afford to take losses if they have enough equity and earnings.†said Stephen Blank, a fellow of America’s Urban Land Institute.

British banks are adopting the same strategy of turning a blind eye to loan covenant breaches.

However, UBS analysts expect Lloyds TSB to suffer a £6 billion first-half loss after charges against its loan book of £13 billion.

There is also mounting concern about exposure to European commercial mortgage-backed securities (CMBS) — bonds issued on the back of securitised commercial real estate loans. Royal Bank of Scotland was active in arranging CMBS in Europe, including a £500 million securitisation for Dunedin, a property group that went into administration last year.

At the same time, the high street banks made big loans to private equity property vehicles set up by American and European investment banks. “Many of these deals were very highly geared. They will be under water in terms of loan to value and some may be having problems paying interest. Rental values are falling and it is hard to maintain income,†said Jane Roberts, editor of EG Capital, a property finance journal.

So on top of this we also have the lovely credit cards defaults on top to cope with.

I will be amazed if we haven't had another bank bailout by the end of the year.

Financial genius at it's best.

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http://business.timesonline.co.uk/tol/busi...icle6728251.ece

So on top of this we also have the lovely credit cards defaults on top to cope with.

I will be amazed if we haven't had another bank bailout by the end of the year.

Financial genius at it's best.

$300bn.

thats a figure to remember.

IIRC, it was the MAXIMUM figure that Subprime was going to cost.

then it was $350, $400, $500, and so on to the TARP ($700) billions and all the other bailouts, about $2trn one would guess.

Edited by Bloo Loo

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http://business.timesonline.co.uk/tol/busi...icle6728251.ece

So on top of this we also have the lovely credit cards defaults on top to cope with.

I will be amazed if we haven't had another bank bailout by the end of the year.

Financial genius at it's best.

Very. It did exactly what they intended it to do - provide large short term illusionary profits upon which bonuses were to be based. At that they were geniuses.

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$300bn.

thats a figure to remember.

IIRC, it was the MAXIMUM figure that Subprime was going to cost.

then it was $350, $400, $500, and so on to the TARP ($700) billions and all the other bailouts, about $2trn one would guess.

So if this runs true to form we can expect this number to increase as the months tick by and more and more crap is discovered?

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So if this runs true to form we can expect this number to increase as the months tick by and more and more crap is discovered?

In a deflationary depression, every loan outstanding has a good chance of becoming 'sub-prime'.

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this thread is pointless

banks dont care about losses anymore

they have become irrelevant

Irrelevant to the banks yes, as the losses are now incurred by the taxpayer.

So highly relevant to everyone paying taxes because this is what your cash is going to be wasted on.

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http://business.timesonline.co.uk/tol/busi...icle6728251.ece

So on top of this we also have the lovely credit cards defaults on top to cope with.

I will be amazed if we haven't had another bank bailout by the end of the year.

Financial genius at it's best.

:P Great post interestrateripoff.....

I just grin now when anyone talks about "green shoots"...... :P

Complete t wats.

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this thread is pointless

banks dont care about losses anymore

they have become irrelevant

Money has to be lent so wages can be paid. ;)

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one of the finest quotes on here in a while.may have to nick that for my sig.

people jsut don't get this simple fact that you've sdtated.you can be as high quality low ltv as you like,you lose yer job or the hotel can't get guests and you're sub prime.

Neither a borrower nor a lender be

In this type of environment never a truer word spoken.

Although thanks to the govt every single taxpayer has become both at the same time.

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What the leading article fails to point out is that, once the dust has settled, if at all, it is not such a disaster that commercial rents are plunging. Parallels with the domestic property market are relevant here: The commercial sector NEEDS a return to reasonable rents and much lower capital costs. Rents were ludicrously high and unstainable, as was the case for homes. The commercial market is just a reflection of the domestic market. Too much speculation, too many spivs, too much optimisim, pyramid selling which left the lower echelons out of the game. In the end all markets have to return to sensible levels. I sincerely hope the commercial property market implodes spectacularly. That's the only medicine that will do any good.

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What the leading article fails to point out is that, once the dust has settled, if at all, it is not such a disaster that commercial rents are plunging. Parallels with the domestic property market are relevant here: The commercial sector NEEDS a return to reasonable rents and much lower capital costs. Rents were ludicrously high and unstainable, as was the case for homes. The commercial market is just a reflection of the domestic market. Too much speculation, too many spivs, too much optimisim, pyramid selling which left the lower echelons out of the game. In the end all markets have to return to sensible levels. I sincerely hope the commercial property market implodes spectacularly. That's the only medicine that will do any good.

Agree 100%. Paying out ALL profits on stupid rents, criminal business "rates" + all the utilities - by the end of the month - there's nothing left --- so NO POINT in being in business at all!!

WEIRD how people EVER put up with the INSANITY of it all.... :rolleyes::rolleyes:

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