Saturday, April 4, 2009

Commercial Banks: Flight to Quality admitted in Europe



A recent survey of 83% of the largest European banks, by a major international, US based real estate firm, found that 59 % of the banks are effectively closed to new business and are not lending against commercial real estate.


In the same survey 22 are lending to new clients and many have caveats regarding how much they would lend and to whom.



In addition to the decline in the number of lenders, loan-to value ratios have also fallen demonstrating that banks are demanding less risk in acquisitions.


In the UK the ratio are 60-70 per cent down from 80-85 percent before the economic downtown. In Western Europe the ratios are 50-60 per cent down from 85-90 per cent.



There is a distinct "flight to quality" in the current debt market. One can still arrange funding for experienced borrowers for prime assets with long leases let to investment grade covenants."



They concluded that the lack of lending against commercial property has led to a huge fall in the volume of completed deals. Global investment in commercial real estate fell 59% in 2008.


Is it a beginning of a retreat to old fashion commercial banking where only those who don't need the money can obtain loans? ( Maybe the the ' Top Hats' will also return?)


I find it highly interesting, and equally disturbing, we can obtain this type of banking data via the Internet from Europe and not a similar survey about US banks.


Does anyone know of a recent and similar public US commercial banking survey?


Bill McInerney, Realtor














BUYING OR SELLING? CALL BILL MCINERNEY 617 816 3933

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