M&T Bank reports “significant increase” in bad commercial real estate loans

Still, Evercore ISI analyst John Pancari described the rise in soured home loans as a “notable leap.” Further problems could arise, as nearly 40% of M & T’s $ 100 billion loan portfolio is in commercial real estate. It’s the highest of any regional bank in the Northeast, according to Evercore, and one of the most concentrated loan portfolios for any midsize lender.

Buffalo-based M&T took out a 2018 $ 230 million loan for the TWA hotel at Kennedy Airport and loaned $ 66 million in 2019 to the Hilton Garden Inn in the financial district.

The bank said NPLs increased in the fourth quarter to 1.92% of its portfolio, from 1.26% at the end of September.

While hotels, office buildings and storefronts lie dormant, mortgage lenders around the world are carefully examining their portfolios. So far, banks have avoided losses on loans thanks to the government’s economic bailouts. But time is running out, at least for some borrowers.

Signature Bank, a major local commercial real estate lender, said Thursday it believes it has set aside enough reserves to absorb loan losses.

“We believe we are sufficiently covered for what might happen,” said managing director Joe DePaolo, adding that deferrals had fallen to 2.7% of loans.

Others were not so confident.

An analyst asked what that meant when Signature said 6.6% of loans were ‘amended’ for reasons related to Covid. Management explained that these borrowers only pay interest, not principal, for a period of six to 12 months.

“So they’re basically deferred, aren’t they?” Asked the analyst.

“We’re giving them a little relief,” DePaolo replied, adding that he thought the loans would be repaid because borrowers continue to pay operating costs, insurance and taxes.

King, the chief financial officer of M&T, assured investors that his bank’s problems were confined to a relatively small number of customers, even though they were significant.

“When looking at these credits, I don’t have to take off my shoes and socks to count them,” he said. “Which is a good thing.”

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