According to Wall Street News, affected by the loss of commercial real estate investment in the United States, this week, related U.S. and Japanese bank stocks appeared**. On Wednesday, the New York Community Bank (NYCB) unexpectedly reported a loss in the fourth quarter of 2023, and its stock price fell nearly 38% in one day on the same day, the largest decline in the three decades since its listing;
U.S. bank stocks continued to tumble on Thursday. KBW Regional Bank Index**23%, the biggest one-day drop since the collapse of Signature Bank in March 2023, and the share prices of many regional banks followed suit.
Bank of Japan AOZORA Bank LtdThis week, it was disclosed that due to the impact of additional provisions related to commercial real estate loans in the United States, it is expected to have a net loss of about 1$9.1 billion, which was also its first net loss since the 2009 global financial crisis, compared to the previous forecast of a profit of 1$6.4 billion.
As a result, the share price of Japanese bank Aozora Bank Ltd fell more than 20% on Thursday and continued to **18% after the opening on Friday. Small and medium-sized banks in the U.S. and Japan are major providers of credit for U.S. commercial real estate, and the impact is increasing as the U.S. commercial real estate industry continues to slump.
According to Nikkei, the Bank of Japan made it clear in its October 2023 Financial System Report that commercial real estate in the United States is one of the biggest bombs in the global financial market. Tesla CEO Elon Musk even bluntly said that the US commercial real estate is rapidly collapsing.
Currently, the U.S. commercial real estate market is huge, accounting for about 90% of the U.S. GDP. Today, the U.S. commercial real estate market is facing the impact of many negative factors such as the rise of remote work, office demand and high interest rates, a significant increase in refinancing costs and a credit crunch. Global co-working giant WeWork filed for bankruptcy protection, adding to the already crisis-ridden U.S. commercial real estate market.
Goldman Sachs said that as remote work models become more entrenched, U.S. office demand will face a sharp decline in the next 10 years as lease contracts expire.
The upcoming peak in commercial real estate debt repayments is likely to further increase risks in the U.S. commercial real estate and banking sectors. According to MSCI Real Assets, U.S. commercial real estate will have $400 billion of debt due in 2023 and nearly $500 billion in loans due in 2024, for a total of $2 in the next five years5 trillion dollars (about 17.)2 trillion yuan) debt maturity.
Against the backdrop of high interest rates, refinancing costs have increased substantially. Since March 2022, the Fed has raised interest rates 11 times, and the upper limit of the US federal interest rate target range has been reduced from 025% soared to 55%。
The concentrated maturity of a large amount of commercial real estate debt, the tightening of loan conditions and the decline in the value of commercial real estate will make the cost, difficulty and risk of developers borrowing new debt to repay old debt significantly. At the same time, it will further exacerbate the risks of the industry.
Investment firm Capital Economics warned that soaring US bond yields and falling market demand could lead to at least 40% of US office buildings by the end of the year. Kyle Bass, founder and CIO of Hayman Capital Management, also warned that U.S. commercial real estate could be a drag on the banking sector, with potential losses of up to $250 billion.
February** Dynamic Incentive Plan If the U.S. commercial real estate market explodes, it will not only seriously affect U.S. economic growth but also exacerbate the risks of the U.S. banking industry. At the same time, it will also trigger a large-scale sale of commercial real estate in the United States** around the world, which will cause incalculable losses to the U.S. financial market.
Therefore, in view of the rising risks of commercial real estate in the United States, in order to mitigate the risks and avoid severe shocks to the financial markets, the market expects the Federal Reserve to continue to cut interest rates to reduce the difficulty and risk of refinancing for commercial real estate developers in the United States.