View more on these topics

Which banks are most at risk from commercial property fallout?


RBS and Lloyds have the largest exposure to UK commercial real estate risks, according to a Moody’s Investors Service report.

The report says the rating agency expects the commercial real estate sector to weaken post-Brexit vote.

Moody’s says large UK banks are better placed to handle this risk than during the financial crash of 2008/09.

Moody’s senior vice president Andrea Usai says: “We estimate that the six largest UK banks have reduced their aggregate gross UK commercial real estate lending exposure by around 40 per cent, to £84.6bn at end-June 2016 from £138.9bn at the end of 2010.”

RBS and Lloyds had exposures of £25bn and £20bn respectively.

Santander UK has the largest exposure as a proportion of its fully-loaded Basel III Tier 1 capital at 94 per cent, as at the same reporting date.

Usai adds: “Pressures on the UK CRE market mounted in early 2016 amid uncertainty about the outcome of the Brexit referendum. And following the acutal vote to leave the EU, we have seen the collapse of some large CRE deals, as well as the suspension of redemptions at some UK property funds — these events signal a sharp change in investor sentiment.”

Moody’s says a severe stress test would erode bank capital despite their protective measures.

Moody’s base-case scenario would see average UK CRE values fall by up to 10 per cent depending on type, quality and location.

If the stress test involves a UK recession then Moody’s expects losses of up to £12bn across the six largest UK banks, making up 14 per cent of their CRE exposure.

The rating agency also says the worst-case scenario would slash large UK banks’ fully-loaded Basel III Tier 1 capital ratios by 113 basis points on average.

RBS would see a drop of 173bps, Santander UK 141bps, Lloyds 136bps, Nationwide 113bps, HSBC 71bps and Barclays 40bps.

But the rating agency says that these firms should be able to offset some of their credit losses through “profits and other management actions”.

The report adds: “In addition, its assessment of these banks’ capitalisation under stress is already reflected in the relevant ratings.”



Accord to launch five-year fixed range

Accord Mortgages will launch a range of five-year fixed rate mortgages tomorrow. The range includes a 2.24 per cent product at 75 per cent LTV, a 2.44 per cent loan at 80 per cent LTV and a 2.60 per cent mortgage at 85 per cent LTV. Each mortgage comes with a £845 fee, £250 cashback […]

AMI: Lenders and FCA still failing mortgage prisoners

Brokers have rallied around the Association of Mortgage Inter­mediaries in calling for lenders and the FCA to overhaul how they treat mortgage prisoners. The issue resurfaced last week in AMI’s latest quarterly economics bulletin. The bulletin says: “AMI is strongly of the view that lenders and the FCA continue to fail mortgage prisoners, refusing to […]


More 2 Life launches lowest lifetime rate

Retirement mortgage lender More 2 Life has launched its lowest ever lifetime mortgage rate of 4.69 per cent on its Capital Choice Plan. The plan is for customer who want a higher lump sum and the ability to make partial capital repayments from day one. More 2 Life channel marketing director Stuart Wilson says: “At […]


News and expert analysis straight to your inbox

Sign up