A pullback in lending among small banks in the U.S. was already underway before the collapse of Silicon Valley Bank and Signature Bank. Now economists expect to see more tightening.
Why it matters: Stricter lending standards among smaller banks is likely to slow economic growth overall. But the commercial real estate sector, already battered by rising interest rates and half-empty office buildings, is particularly at risk.
The big picture: Big banks get a lot of attention, but there are about 4,800 banks in the U.S. — and the small ones play a large role in the economy, as a recent Goldman Sachs report notes.
Small and midsized banks, defined as domestically chartered banks not among the 25 largest, currently hold 67.2% of all outstanding commercial real estate loans, and 37.6% of loans overall. (h/t: Wall Street Journal for chart inspiration.)
These small players grease the wheels of the economy in all kinds of ways, particularly in specialized areas and regions. Think, Signature Bank's lending to Broadway or SVB's lending to startups.
reporting on personal experience. Early/Mid 1980s' Texas/Houston. The Oil bust lead to the S&L bank crisis. many in Texas lost their jobs, and many of these who owned homes with unpaid mortgages simply mailed the keys of their houses to the Bank. Many of these banks were the S&Ls.
Not all commercial real estate is in trouble. Office Tower are one category that is in trouble another is retail malls. One area that is growing is retail depots for the likes of Wallmart, Amazon and their likes. In Houston along the outer loop this type of construction is everywhere.
In any case starting Q2/2024 we should be seeing who is swimming naked