Deutsche Bank Plans To Offload $1B In U.S. CRE Loans
Deutsche Bank is looking to sell $1B in U.S. commercial real estate loans to provide itself some capital relief.
The Frankfurt, Germany-based bank plans to offload the loans because the property sector has put a strain on the bank's credit provisions, Bloomberg reported. The lender has $16B in loan exposure to U.S. commercial real estate, $7B of which is tied to the office sector.
Deutsche Bank set aside $140M in credit provisions from U.S. CRE loans in the second quarter, up from $130M in the first quarter. CEO Christian Sewing said in a July 24 conference call that total 2024 losses from the sector were likely to be around $546M to $573M.
Although the loan originations only make up 3% of its portfolio, they accounted for more than a quarter of the bank's credit provisions in the first quarter, Bloomberg reported.
The U.S. office market has continued to be hit hard by the ripple effects of the pandemic and the rise of remote work. In April, 1.2B SF of office space was available, with little hope of a meaningful chunk being taken up anytime soon.
High interest rates have also strained assets and put pressure on Deutsche Bank's real estate portfolio.
The Federal Open Market Committee didn't cut rates during its meeting Wednesday, although inflation is cooling and unemployment is on the rise.
However, optimism that cuts are on the way has also risen, with signs pointing to a possible cut in September if things continue to trend in the right direction. Friday morning's weak jobs report has bolstered this hope.
