Bank of America Corp.’s Chief Executive Officer Brian Moynihan said it’ll take time for the banking industry to work through issues with commercial real estate loans, after a New York regional lender alarmed investors with its exposure in the troubled sector.
“Commercial real estate is a slow burn - it’s a classic burn,” Moynihan said in a Bloomberg Television interview Tuesday from the bank’s trading floor. “The trading attitude, which is these assets have to move at a price tomorrow morning, isn’t the way the banking system works.”
Last year was a bleak one across the banking industry. In the first half, dozens of regional lenders swooned - and some collapsed - as rising interest rates slashed the value of assets on their books, saddling US banks with hundreds of billions of dollars of unrealized losses. Some lenders started raising the possibility of defaults on commercial real estate loans, and the problem has yet to subside, with New York Community Bancorp getting a cash infusion this month amid property-loan troubles of its own.
“We work with clients - you take a building and figure out what the ultimate end state rental rolls will provide, you refinance it, sometimes that wipes out the equity, sometimes it doesn’t,” Moynihan said. “We’re careful in how we underwrite as an industry.”
The market disruption across the board last year allowed Bank of America to take market share, according to Wendy Stewart, the firm’s president of global commercial banking. She added that the business she oversees has seen strong loan growth and that her team is continuing to invest to help clients.
“We’re really making investments in our team,” Stewart said. “We continue to hire more bankers, and we’re making a lot of investment...
