The Real Deal Miami

For regional banks, commercial real estate will prevent timely TARP exit

December 07, 2009 04:24PM

Regional banks plagued by souring commercial property loans are
unlikely to exit the federal government’s Troubled Asset Relief
Program, or TARP, before 2011, analysts say. Loans held by smaller, localized
financial institutions in the bailout program are far more
concentrated in commercial properties like malls, hotels, apartments
and home developments than those of larger banks like Citigroup and
Wells Fargo, Bloomberg reported. With 3.4 percent of such loans unpaid
in the third quarter, and with that rate potentially reaching 5.3
percent over the next two years, according to New York-based research
firm Real Estate Econometrics, regulators probably won’t be eager to
allow these smaller lenders to repay their bailout funds. “Somebody
that has a lot of CRE exposure is going to be held to a higher
standard” before they can exit the program, said Paul Miller, an
analyst with Arlington, Va.-based FBR Capital Markets and a former
bank examiner. “You’ve got to be careful they don’t allow these guys
to pay back TARP, and then a year goes by and have to give it back to
them.” [Bloomberg]