Experts are stating that even though there are a few problems in the commercial mortgages industry, by and large these loans are helping banks stay afloat in these troubled times. There have been a few foreclosures on commercial mortgages, but for the most part, this market is still going strong and for many banks, this may be the only thing keeping them afloat, especially if they were involved too deeply in subprime lending for residential housing.
“Not all banks have been affected by the global credit crunch in the same way. Among the UK banks, those with less exposure to the US and UK housing markets and greater exposure to Asia have fared relatively well. The key areas to monitor now are the strength of banks’ capital and liquidity positions as well as their exposure to commercial property and specialist mortgage markets where prices may weaken further,” states Tim Gibbens, Global Financials Analyst at Alliance Trust.
“When conditions eventually stabilise, banking stocks are likely to experience a sharp bounce but it may be short-lived. Tough fundamentals such as a relative lack of growth options, pressure on margins from increased competition and still-stretched capital positions will soon reassert themselves.”
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