Goldman Sachs The Markets
Regional banks back in focus on real estate concerns
Feb 9, 2024
Ryan Nash, managing director in the Financials Group within Goldman Sachs Research, discusses the resurgence of regional banks in the news due to their exposure to real estate. He addresses the risks associated with commercial and residential properties, spillover risk to the banking industry, and future outlook. Highlights include the positive macro environment, low concern for residential real estate, and need for stock price stabilization.
08:55
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Quick takeaways
- Recent concerns about regional banks' exposure to real estate, both commercial and residential, have put them back in the spotlight.
- While the risks in residential real estate are low due to low interest rates, the office sector is facing challenges with lagging values and increased debt service costs.
Deep dives
Regional banks facing concerns over real estate exposure
The podcast discusses recent concerns surrounding regional banks and their exposure to real estate, both commercial and residential. While this situation is not a repeat of last year's crisis, it is a byproduct of what happened during that time. The main characteristics of the banks that failed last year included highly illiquid assets, sophisticated depositors, and insufficient short-term liquidity. However, the current situation involves only one or two instances of banks crossing regulatory thresholds and becoming subject to heightened regulation. Overall, the industry is deemed to be in reasonable shape.
