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Deutsche Bank to Offload $1 Billion in CRE Loans

Deutsche Bank to Offload $1 Billion in CRE Loans

Delinquency rates for commercial mortgages showed a marginal improvement in the second quarter amid a challenging economic landscape.

Jordan B. & Han-Gwon Lung
August 04, 2024

Together with

Good morning. In response to rising interest rates and declining profits, Deutsche Bank AG is set to offload up to $1 billion in U.S. commercial property loans from its balance sheet.

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BAD DEBT

Deutsche Bank to Offload $1 Billion in CRE Loans

Deutsche Bank AG is taking steps to reduce its exposure to U.S. commercial real estate, aiming to sell off $1 billion in property loans to clean up its balance sheet.

Exposed: The Frankfurt-based bank, a major lender to U.S. commercial real estate developers, had $16 billion in loan exposure at the end of Q2 2024, with nearly $7 billion linked to office properties. The decision to sell these loans follows a doubling of credit provisions for the asset class compared to 2023.

Bloomberg

Path to profits: Deutsche Bank's loan portfolio, particularly in commercial real estate, is underperforming and has negatively impacted its profits, despite the bank achieving record earnings last quarter. The bank is seeking to enhance its margins by shedding these risky assets.

Zoom in: Deutsche Bank is not alone in facing difficulties; other institutions like M&T Bank are also grappling with rising defaults in CRE loans. However, regional and community banks, holding the majority of CRE loans, are more exposed to these market pressures.

➥ THE TAKEAWAY

Looking ahead: The state of the commercial real estate market remains uncertain. Opinions vary widely on whether the market has hit bottom or if further declines are imminent. The Fed's decisions on interest rates will play a crucial role in the recovery.

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