Bank Health and Future Commercial Real Estate Losses

By Tom Doolittle, H. Peyton Young, Hashim Hamandi, and Nick Schwartz

Published: July 11, 2024

Q4 2023 Bank Assets ($ billions) and CRE Loans-to-Total Assets (percent)

Banks are the largest holders of CRE debt, and CRE loan credit quality is deteriorating as a result of underperformance within the office sector. Some banks are more vulnerable to CRE loan losses due to significant CRE concentration, large unrealized securities losses, and sizable uninsured deposit balances. CRE loans could generate significant future losses that exceed shareholders’ equity for these banks unless the banks become more resilient (Brief no. 24-04).

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