(Reuters) – Shares of large and mid-sized U.S. banks sharply underperformed the broader market on Wednesday with the S&P 500 Banks Index (.SPXBK) closing down 2.0% while the benchmark S&P 500 Index (.SPX) fell 0.6% with worries about commercial real estate loans in focus among bank investors.
Investors worried about potential losses among banks from office real estate loans after comments from executives, including Wells Fargo & Co (WFC.N) Chief Executive Officer Charlie Scharf and Blackstone (BX.N) President Jonathan Gray at a Sanford C Bernstein investor conference.
Scharf said on Wednesday there will be losses in the office loan sector and that the bank was proactively managing its portfolio while he looked to reassure investors that it is not “overly concentrated” in that area.
Gray talked about “unprecedented weakness” in older office buildings while noting that this segment currently makes up less than 2% of company’s equity portfolio in real estate.
“Vacancy is 20-plus percent, rents are declining, companies now are obviously thinking about their space needs in light of remote work and the economic climate that’s ahead. Lenders are reluctant to have exposure to office buildings. Buyers are reluctant. Valuations are going down,” Gray said, according to a transcript from the Bernstein conference.
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Source: www.reuters.com
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