Loans continue to grow, but at a slower pace in Q4
S&P Global Market Intelligence - Zain Tariq - 10 March 2017
Multifamily loan growth slowed in the final quarter of 2016 to the lowest pace in over three years. Aggregate multifamily loans at U.S. banks and thrifts hit $382.72 billion as of Dec. 31, up 2.3% from the previous quarter and 11.2% from the year-ago quarter. This was the slowest quarter-over-quarter growth since the first quarter of 2013 and slowest year-over-year growth since the third quarter of 2013.
Delinquent multifamily loans accounted for 0.31% of total multifamily loans as of Dec. 31, unchanged since the third quarter, but down 10 basis points from a year ago.
According to the Federal Reserve's January 2017 Senior Loan Officer Opinion Survey, a "modest net fraction" of banks reported both weaker demand for multifamily loans in the fourth quarter and an expectation that multifamily loan quality would deteriorate somewhat over 2017.
The nation's largest multifamily lender, JPMorgan Chase & Co., added $2.12 billion in multifamily loans in the fourth quarter, pushing its total portfolio to $66.58 billion. During 2016, JPMorgan added $7.74 billion in multifamily loans while its percentage of delinquent multifamily loans fell by eight basis points to 0.22%.
Despite the growth, JPMorgan's CFO, Marianne Lake, said during the company's Jan. 13 fourth-quarter earnings call, that JPMorgan has already pulled back from certain markets like Dallas and Houston because the company saw them becoming "soft" before the decline in energy prices. Lake also remarked that even though the company is "still very active" in places like Seattle, Denver, Washington, D.C., and San Francisco, it is "keeping an eye" on the expected increase in multifamily supply in that market.
New York Community Bancorp Inc., the nation's No. 2 multifamily lender among banks and thrifts, posted $26.96 billion in multifamily loans as of Dec. 31, 2016. The bank's commercial real estate loans were equal to 813.90% of total risk-based capital at year-end, a concentration ratio that has raised eyebrows. Multifamily loans accounted for roughly 77% of the company's total commercial real estate portfolio.
During the company's Jan. 25 fourth-quarter earnings call, CFO Thomas Cangemi said, "We're very cognizant of the focus in respect to the white papers that are out there and the various emphasis on CRE concentration. But we're in the 800s and we've been [at] higher levels. We obviously talked about potentially bringing in some Tier 1 capital, which will bring that number down and we'll manage through it."
Cangemi continued, "As far as the company's focus, we're not going to change our business model. We have a very strong asset quality with no credit losses and we apply capital to the risk profile. Again, when you do that exercise you realize that a rent-regulated building in the city of New York has very low risk compared to other assets classes in other parts of the United States."
This article originally appeared on S&P Global Market Intelligence’s website under the title, "Multifamily loans continue to grow, but at a slower pace in Q4"