FBR UPDATE - Banks & Commercial Real Estate: Who Is Concentrated, What Regulators Care About, and Which Banks We Like
Bank CRE concentration has come into focus, as cap rates have fallen to very low levels, regulators have sounded alarm, CMBS issuance is in decline, and certain banks have had to slow growth and/or raise capital to manage CRE concentration. The valuation of CRE concentrated banks reflects a heightened sense of risk. The silver lining is that the CMBS market is a weaker competitor for banks, and banks with sufficient risk management may benefit from reduced competition, wider spreads, and better underwriting. Of the CRE concentrated banks, our favorites include
- ConnectOne Bancorp (CNOB – Outperform)
- Customers Bancorp (CUBI – Outperform)
- First Foundation (FFWM – Outperform)
- Signature Bank (SBNY –Outperform)