Commercial real estate taking toll on banks

Atlantic Equities’ Richard Staite has named PNC and US Bank as “underweight,” fueling speculation that the commercial real estate market will continue to ravage the banking industry. Both PNC and USB have over 50 percent of their loans in commercial real estate, compared to Bank of America and JPMorgan who have around a third of their loans tied up in commercial properties, according to Bloomberg’s Adam Johnson. Referring to Staite’s findings, Johnson said that PNC and USB’s weakness shows that the commercial real estate market is still dropping. “Commercial real estate has only begun to crack,” Johnson said, “because businesses were able to hold on longer than individuals.” Johnson also noted that leverage in the form of tangible common equity at the two banks is still relatively high — about 3.7 percent for PNC and 5.5 percent at USB — yet those figures aren’t on par with comparable banks that maintain about 8 to 10 percent.