Was not CRE the next shoe to drop?

by PlanMaestro

And having taken a look to the banks, I cannot avoid drumming another one of our recent themes.

Last year I ranted and complained about the air time given to this nonsense that CRE was the next shoe to drop. Check out the cap rates by sector (lower is better). CRE is doing badly indeed.   Hat tip  CRE Console

And the CRE news from the banking front are also very good. These are some indicators from bankregdata. Let’s start with the percentage of CRE loans non-performing. It peaked two quarters ago and has started to decrease.

And the percentage of 30 to 90 days delinquencies to total loans, an early indicator of potential problems, has been stable and stability is all the banks need to  improve. Remember that pre-tax pre-provision earnings are in the background increasing reserves and capital.

Also the banks, despite continuing a slow decrease of total loans, have stabilized the proportion and absolute amount of  CRE loans.

So much for impending doom. I think the ball is on the pessimist court and their only shot left is a contagion of sovereign defaults. Though, I have not seen any compelling case of a mechanism that would  infect American commercial banks.

Latin American, Canadian and Asian commercial banks were not affected by the 2008 crisis. Why American commercial banks would be affected by a European crisis with so much time to prepare? With several American banks priced for doom, I really would love to know.