RBS and Lloyds banking 'most exposed' to real estate market
Royal Bank of Scotland Group and Lloyds Banking Group Plc are the two big UK lenders most exposed to the commercial real estate market, which poses a risk for banks after asset managers froze withdrawals from property funds, JPMorgan Chase & Co said.
RBS has £25.2bn (€29.3bn) of lending to the sector, accounting for 66pc of its tangible net asset value, a measure of capital, and Lloyds has £18.1bn, or about 46pc of its TNAV, Raul Sinha, an analyst, said in a report.
While the risks for major banks are "manageable", small lenders could see greater losses because of higher loan-to-value ratios on their CRE debt.
"Downside risk from UK commercial property prices is likely to pressure domestic UK-exposed bank valuations," Mr Sinha wrote. "Major UK banks have broadly maintained their underwriting standards in recent years, with smaller banks and building societies including challenger banks having a relatively high proportion of more highly leveraged CRE loans."
This week, three asset managers halted withdrawals from real-estate funds after investors rushed to redeem money amid Brexit uncertainty. (Bloomberg)