PNC Bank CEO: Coming Commercial Real Estate Slump Will Not Rival Residential Crash
PNC has accepted $7.6 billion in government bailout money in the form of warrants and was instructed to raise $600 million in capital following the results of the Treasury Department's stress test earlier this year. It is the nation's fifth-largest bank by deposits and 11th-largest bank holding company by assets.
The Ticker, as you have read here, has been particularly worried about a coming commercial loan/commercial real estate crash that could cripple the economy just as it's trying to recover from the residential real estate crash.
Rohr, a banking veteran, calmed The Ticker's fears a little.
Though he acknowledged that the commercial real estate (and loan) situation is "troublesome," he added that it is "not nearly as bad" as the residential real estate crash in which home prices have plummeted more than 30 percent from their 2006 high.
Rohr explained his reasoning: Banks hold mortgages on homes. If a homeowner defaults on his or her mortgage, the bank loses that stream of revenue.
Banks also hold mortgages on shopping malls, a big chunk of the commercial real estate sector. If the economy forces one of the mall's tenants to go out of business, the bank should be able to re-rent that space, albeit at a lower rate, Rohr said.
So, even though the bank's revenue stream is diminished from the commercial property, it is not halted, as it is from the residential property.
August 11, 2009; 3:22 PM ET
Categories: The Ticker | Tags: Jim Rohr, PNC, commercial real estate
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