Yahoo Finance German Banks’ Soured Property Loans Surged in Quarter
(Bloomberg) -- German banks saw a jump in customers struggling to pay back commercial property loans in the fourth quarter, as the sector faces higher interest rates and shifts in consumer behavior exacerbated by the pandemic.
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Banks in the country saw their non-performing commercial real estate loans swell to €13.6 billion ($14.8 billion) at the end of December from €9.7 billion three months earlier, according to the European Banking Authority. As a share of German banks’ overall commercial real estate loans, the soured debt overtook the ratio for the wider region, the data released on Thursday show.
German banks piled into commercial real estate lending over the last decade as negative interest rates at the European Central Bank squeezed returns from other businesses. Yet property developers have started defaulting on loans after central banks raised borrowing costs to fight inflation. The pain may continue as work-from-home policies reduce demand for office space.
Read More: Germany’s Slow-Motion Property Crash Is a Looming Risk for Banks
Ten of the biggest German banks to report 2023 earnings set aside €2.3 billion of provisions in that period for potential losses on commercial real estate loans, according to calculations by Bloomberg.
--With assistance from Stephan Kahl.
(Corrects story originally published April 4 to clarify the definition of the soured loan ratio in second paragraph.)
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