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| Michael Bull |
ATLANTA, GA (Jan. 14, 2013) – The U.S. banking industry has
recovered steadily from its doldrums during the Great Recession, but lending
institutions are still faced with a significant amount of troubled real-estate
loans.
That was the view of a panel of experts on the most recent
episode of the “Commercial Real Estate Show” radio program, hosted by Michael
Bull. The episode took an enlightening look at the banking sector and
outlined strategies for banks and other lenders faced with problem loans.
As of September 2012, 91 percent of U.S. banks were
profitable, according to Christopher Marinac, managing principal and
director of research for FIG Partners. “That’s a very positive shift and
certainly a dramatic difference from where the industry was sitting in 2009,
2010 and early 2011,” Marinac said.
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| Christopher Marinac |
Furthermore, 51 banks failed in 2012, a notable decline from
the preceding years, Marinac added. He predicted that number to drop to approximately
30 this year.
Still, “everything’s relative,” Marinac said. “If you go
back seven years, the industry was making 14 to 15 percent returns on equity.
That no longer is the case. We’re closer to 8 or 9 percent, as a general rule.”
For the most part, the larger banks are the most profitable,
while community banks are more likely to struggle, according to Marinac.
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| Joe Briner |
Despite the steadily improving conditions, the banking industry
has “a long way to go” in working its way through troubled real-estate loans,
said Rob Whitmire, a senior vice president at Bull Realty who oversees the
firm’s Special Asset Services Group. “There is still a significant amount of
problem loans out there that will have to be dealt with.”
Bankers and lenders saddled with troubled loans must be “be
decisive and do [their] homework,” advised Joe Briner, a partner with
GGG Partners, a firm that advises banks and financially distressed companies.
“The [lenders] that do it the best, they have a system,”
Briner added. “They rapidly assess their expected recovery, and they implement
their plans. They’re disciplined about how they do it.”
Marinac echoed Briner’s sentiments. “Timing is everything,”
Marinac said. “[Banks’] first mistake [with troubled loans] is waiting,
[kicking] the can down the road and [figuring] that they can have a better
solution if they wait three to six months. I’ve never seen that work.”
Show host Bull agreed that banks are usually better suited
to move quickly to sell foreclosed properties. “We’ve seen instances where
we’ll bring a lender an offer for $5 million and two and a half years later,
they’ll sell it for $3.5 million and have spent a lot of money on [the asset],”
Bull said.
The entire episode on bank and servicer strategies is
available for download at www.CREshow.com.
The next “Commercial Real Estate Show” will be available
Jan. 17 and will examine the U.S. office market.
Contact:
Stephen Ursery
The Wilbert Group
E-mail: sursery@thewilbertgroup.com
Office: (404) 965-5026
Cell: (404) 405-2354
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