September 5th, 2010 | 
Author: European banks could suffer losses of up to 92,000 million between 2009 and 2011 in connection with its portfolio of commercial loans in the UK, Spain and Ireland, which represents almost 10% of total loans this class in those countries, according to a report by Standard & Poor’s warning that most of the losses will be supported by domestic entities.
“While commercial property prices have started to rally in some European countries, is likely to have had only a modest beneficial effect on the asset quality of banks”, pointed out analyst for Standard & Poor’s Giles Edwards.
Specifically, the risk rating indicates that banks in the UK, Ireland and Spain in particular will probably continue to provide high rates of defaults on these loans until 2011, although some organizations are vulnerable in German Some aspects for its large exposure to commercial real estate loans abroad.
“We think it is likely that the commercial real estate loans continue to be a persistent area of weakness in the accounts of many European banks for years, which for entities with a higher exposure implies that the quality of these assets may burden their grades “, says the agency.
In this regard, S & P notes that it took into account this possibility in the status of the entities of the United Kingdom, Spain, Italy, Germany and Ireland, although not ruling out action at the individual level if the experience of the entity distance materially from that expected based on stage or, more broadly, if market developments leading to the main stage of the review agency.
Moreover, the credit rating agency highlighted the trend observed among banks, especially among the Spanish, acquire and build up portfolios of properties, especially houses, to resolve the processes of embargo, as these practices may delay recognition of losses and be inefficient from an economic point of view when you start to raise interest rates.
“Notably in Spain we have observed the trend among banks to proactively acquire portfolios of residential real estate issues,” the rating of risks, explaining that the accommodation interest rate policy has made so far in these practices reduce costs , although it could pose “high risk” to the prospects of slow and short revaluations in the property sector, a weak growth of European economies and the likely increase in interest rates later this year or early 2011 .
“These practices may simply mean the delay in recognizing losses and the risk that rising interest rates in late 2010 or 2011 become increasingly ‘ineconòmica” says S & P, especially in case of countries where banks have not received wide support in Ireland or in some cases in Germany.
Furthermore, remember that the risk rating, according to data from the National Statistics Institute (INE), nominal housing prices have fallen 10% since maximum March 2008, which would reach almost 15% in real terms, and asserts that “given the weak economic outlook and the apparent problem of oversupply of new homes expected an average reduction of prices up 30% since 2012 with more suffering in the coastal areas.
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Posted in Business Loans | 
Tags: commercial loans, commercial property, commercial real estate loans, European banks