The Real Deal New York

Fed says Deutsche, NYC’s most active CRE lender, is “troubled”

Bank provided $6B+ in non-construction mortgages and more than $2B in construction loans over 12-month period
May 31, 2018 10:33AM

Deutsche Bank Headquarters in Frankfurt, Germany (Credit: Wikipedia)

Deutsche Bank’s U.S. operations received a “troubled condition” assessment from the Federal Reserve last year, prompting the bank to take measures to decrease risky lending operations and trading.

Deutsche was the most active lender in New York commercial real estate between October 2016 and September 2017, with more than $6 billion given in non-construction mortgages and more than $2 billion in construction loans.

As a result of the Fed downgrade, the bank has had to seek approval from the feds on hiring, firing and even employee transfers. The rating, which was reported by the Wall Street Journal, judges a bank’s capital adequacy, asset quality, management, earnings, liquidity, and sensitivity to market risk, and they receive a score of one to five, five being the worst. The “troubled” designation is given to banks with a four or five rating.

The Journal cited sources that said a subsidiary of the bank, Deutsche Bank Trust Company Americas, was given a “problem bank” rating by the Federal Deposit Insurance Corporation, the government body that provides it with insurance.

Deutsche Bank shares fell 6 percent Thursday. A spokesperson for the bank said in a statement to the Journal: “We have previously indicated that our regulators have identified various areas for improvement relating to our control environment and infrastructure. We are highly focused on addressing identified weaknesses in our U.S. operations.”

However, the bank’s bold lending moves in New York came as it posted losses of €5.6 billion in revenue from the bank’s core businesses between 2015 and 2017. Last month, it appointed its new chief executive, Christian Sewing, to focus on financial services to European companies, rather than global markets.

Meanwhile, prosecutors have scrutinized a $285 million loan from the bank to Kushner Companies finalized a month before the election, when President Trump’s son-in-law and senior adviser Jared Kushner was still company CEO. [WSJ] — David Jeans