Europe's banks face less threat from some of the problems now showing in the commercial real estate markets than their U.S. counterparts, analysts at JPMorgan have said.
Economists are worried commercial property could be the next shoe to drop if problems in global banking markets trigger a broader credit crunch for the multi-trillion-dollar sector that was already under pressure.
"Fundamentally, we believe that any contagion from either U.S. banks or U.S. CRE onto European peers is not justified, given different sector dynamics," JPMorgan analysts said in a research note published late on Monday. That would accelerate a property sector downturn, aggravating underlying health concerns as it did during the 2007-08 global financial crisis and a number of other major crashes.
Lending to commercial property accounts for about 40% of all loans by smaller U.S. banks, defined by the Federal Reserve as being those outside the 25 largest by asset size. These banks account for about 70% of outstanding loans to the commercial real estate sector.
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