March 15, 2016
A report released today by Kroll Bond Rating Agency (KBRA) in New York City indicates the banking industry is “entering a more normal period of building loan reserve levels for future losses,” suggesting higher credit costs could be ahead.
On the real estate side, loans secured by all asset types increased by 4.9% in Q415, with construction and development leading the way at a 15% increase, YOY. Though real estate conditions have thrived during the past several years, that could change.
Furthermore, net charge-off of commercial & industrial loans totaled $512 million in 2015, a 43.4% annual year-over-year increase. KBRA blamed the lower oil prices, which, in turn, are impacting some energy sector borrowers.
The band rating agency is forecasting another increase in loss provisions for C&I exposure for the first quarter of this year.