According to the report on Tuesday(June 11th) from Pimco, more regional banks in the United States are expected to collapse because of a "very high" concentration of commercial real estate loans on their balance sheets.

John Murray, the head of global private commercial real estate team at Pacific Investment Management Company, said in an interview, "From shopping malls to offices, lenders of various assets will face real difficulties as they have just begun."

The uncertainty of the Federal Reserve's interest rate cut has exacerbated the challenges facing the commercial real estate industry. High borrowing costs have depressed valuations and led to defaults, resulting in lenders holding onto assets that are difficult to sell. Murray pointed out that, contrary to some market expectations, large banks have been selling some high-quality assets first to avoid further losses.

He said, "However, as bad loans increase due to maturity, we expect banks to start selling these more challenging loans to reduce the risk of bad loans." Murray added that his team has been snapping up commercial real estate loans sold by some large U.S. banks over the past 18 months.

Earlier this year, New York Community Bancorp shocked investors by cutting dividends sharply and hoarding more cash to deal with potential bad loans, causing the stock price to plummet and ultimately requiring an injection of funds. According to assets, the largest regional bank, U.S. Bancorp, increased its loan loss provisions in the first quarter.

According to the March report of the MSCI Physical Asset Index, regional banks are the only banks that have not required commercial real estate borrowers to pay additional down payments in recent years, highlighting their vulnerability to declining values. This year, deposit institutions will face about $441 billion in real estate debt maturity.

Murray said that for large banks, real estate risk is not expected to cause systemic bankruptcy because their commercial real estate loans have been restricted since the financial crisis in 2008. But he added that borrowers' inability to repay loans means that their loan volume will be less than in 2021 and 2022, contrary to some market expectations.

Meanwhile, many mortgage real estate investment trusts have gradually been marginalized due to their own problems. This has limited their ability to underwrite new investments. The Park Hotel Real Estate Income Trust Fund last month tightened its ability to withdraw capital from shareholders to maintain liquidity and avoid asset sales, while withdrawal requests for the Blackstone Group's $59 billion real estate trust fund have increased.

Murray said the loan amount of major public mortgage real estate investment trusts has decreased by 70% compared to 2021. Although banks often occupy most of the headlines, another area that needs close attention is the more than $200 billion in loans issued by U.S. debt funds that will mature in 2025. Many of these loans were issued at the peak of the pricing in 2021, usually with a term of three years and an upper limit interest rate of three years.

He said, "The first catalyst for asset-level pressure is emerging because in this high-interest-rate environment, assets will be difficult to pass the extension test. Both from the perspective of capital markets and fundamentals, rising interest rates and economic recession pressures have brought real challenges to commercial real estate."