US regional banks are expected to set aside more money to cover potential commercial real estate (CRE) losses and sell more property loans as the sector remains under pressure a year after the collapse of Silicon Valley Bank and Signature Bank.

Most multifamily loans are made by regional banks, so when New York Community Bank (NYCB.N) posted a surprise fourth-quarter loss it intensified fears about the industry’s exposure to commercial real estate. Multifamily properties with more than five units are a major concern, especially since the bank had booked losses on its real estate portfolio.

Scrutiny of regional banks has increased after Silicon Valley Bank’s collapse prompted by high borrowing costs that exceeded its income from low-rate loans following the Federal Reserve’s aggressive rate hikes since March 2022. Many banks have unrealized losses on securities portfolios, including mortgage-backed paper.

 

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US regional banks seen booking more commercial property losses, loan sales