European Banks Shed Light on Their CRE Exposures Amid Rising Concerns for the Sector

The commentary focuses on European banks’ disclosure of their exposure to the European Commercial Real Estate (CRE) sector in Q2 2023. Summary highlights from the commentary include:

• While not all banks have made explicit reference to their respective CRE exposures, a majority of our sample of 48 European financial institutions have disclosed data and/or CRE information in their Q2 earnings presentations with varying degrees of detail.

• On average, CRE lending in Europe accounted for roughly 8% of total loans in Q2 2023. Some Nordic countries and Germany were well above the average.

• CRE exposure seems fairly diversified by property type. The office segment alone accounted for around 28% of total CRE exposure.

“In 2023, European banks have provided more disclosure regarding their Commercial Real Estate (CRE) exposure, in an effort to address investor concerns given a more challenging environment for the sector“, said Borja Barragán, Senior Analyst from the DBRS Morningstar Global Financial Institutions team. “Overall, banks expect asset quality in CRE to deteriorate as reflected in the increase in loan loss provisions and Stage 2 loans in Q2 2023.”