Banks Continue De-leveraging as Holdings of Commercial Real Estate Loans Declined 7.5 Percent in 2010

Blame it on write-downs and write-offs. Blame it on the runoff of maturing loans. Blame it on limited originations. Blame it on a combination of the three. Whatever the principal reason, the nation’s largest banks reduced their holdings of commercial real estate loans in 2010 by approximately $75 billion (7.5 percent) to roughly $929 billion. Not surprisingly, the entire decline was associated with changes in one loan segment: land and construction loans. Total mortgages on income-producing commercial and multifamily property, however, remained relatively static at about $609 billion and $134 billion, respectively.

We appear, it is hoped, to be reaching the much-sought-after inflection point where banks are earning enough money and are able to increase their equity base sufficiently that they can now both absorb write-offs and write-downs and get on with the business of making loans. One hopes that everyone will now practice safe and conservatively underwritten lending.

Key takeaway: It’s getting a little safer to dip one’s toe into the lending “pool” as banks should become friendlier as the year goes by, with the obvious exception of construction and land loans. Below is a list of the top 25 banks, ranked by total commercial real estate loans (i.e., the sum of commercial, multifamily, and construction and land loans outstanding). It’s not that they are the only places to go, but in the current era of diminished appetite for real estate risk, the chances should be better—assuming a neutral business relationship—with a larger financial institution.

Once the numbers have been parsed, the nation’s top 1,000 banks are estimated by Trepp LLC (Trepp) to have total assets of $15.8 trillion, of which 8 percent ($1.263 trillion) are real estate mortgages consisting of commercial real estate loans (67 percent or $846.8 billion), multifamily mortgages (12.7 percent or $160.6 billion), and construction and land loans (20.2 percent or $255.6 billion).

The Trepp calculated top 25 include the following:

1. Wells Fargo
2. Bank of America
3. J.P. Morgan
4. MetLife
5. U.S. Bancorp
6. BB&T
7. Regions Financial
8. PNC Financial
9. TD Bank
10. New York Commercial Bank
11. M & T Bank
12. Zions Bancorporation
13. SunTrust Banks
14. Capital One Financial
15. Fifth Third Bancorporation
16. BBVA USA Bancshares
17. Marshall & Ilsley
18. Citizens Financial
19. Synovus Financial
20. Citigroup
21. Comerica
22. BancWest
23. KeyCorp
24. Popular Inc.
25. UnionBanCal