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2.7%  Q1 GDP    4.57%  avg. 30-year mortgage     9.5%  Unemployment

PNC Bank CEO: Coming Commercial Real Estate Slump Will Not Rival Residential Crash

Jim Rohr, chief executive and chairman of PNC Financial Services stopped by The Post this morning for a meeting with reporters and editors.

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.

-- Frank Ahrens
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By Frank Ahrens  |  August 11, 2009; 3:22 PM ET
Categories:  The Ticker  | Tags: Jim Rohr, PNC, commercial real estate  
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Comments

I could use a couple of billion. Time to hold up another bank. Keep me out of the newspaper. When you hold up banks, you need more than plastics. I need a fence and more Posts. Banks holding up banks. More crashing ahead from what I can see. WPO looks rock solid, which is good. It can always be better and I'm sure it will be. Lots of real estate going cheap and lots of cheap money floating around. A real Swiss cheese economy. Don't worry so much.

Posted by: Dermitt | August 12, 2009 11:06 AM | Report abuse

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