M&T Bank has reported higher risk levels in the Office in the Fourth Quarter

M&T Bank’s Darren King (M&T, Getty)

Like raise rates targeting borrowers with loan defaults, M&T Bank reported early signs of distress in the fourth quarter, particularly in its home loans. office

About 20 percent of the agency’s $5 billion loan portfolio is in distress, meaning those mortgages are at risk of default, chief financial officer Darren King said in a statement. earnings call on Thursday.

Those mortgage offices, which comprise about 10 percent of the bank’s commercial real estate loans, are concentrated in the east. About 15 percent is comprised of office buildings in New York, King said.

“If we talk about our payment expectations as we go into this year, that’s where we’re most concerned,” said the CFO, referring to the written off loans. loss when a bank believes it is insolvent. collect on the debt.

M&T is known for more family than office loans. The bank said most of its home loans, which totaled $45.7 billion in the fourth quarter, are due in 2024 or later, meaning deep signs of trouble aren’t coming.

However, King said the bank is testing the space and listings in its branch office “to make sure we have enough insurance.”

In addition to that short-term payback issue, King said a long-term concern is the increasing number of baby boomers reaching retirement age, which could revive housing. the offices.

Across its total loans, which include consumer loans and residential mortgages, the bank reported a 3 percent increase in bad loans — loans in the past 90 days — to $491 million from the third quarter. three in the fourth quarter.

Although small, the increase is a sharp turnaround from the previous quarter.

For more than a year, the bank was able to reduce penalties by more than $1 billion in the second quarter of 2021 as borrowers struggle from the disease.

Most of the losses may be due to the high financing costs when the loans come.

The bank said its home loan business was down $592 million or 1 percent in the fourth quarter from the third. King blamed the lack of construction loans.

“In the real estate market, the growth that we’ve had for the last four quarters is just a reduction in construction,” he said. King.

Although most of the construction work started at the end of 2018 in 2019, few started during the pandemic, the authorities said.

While the construction is attached to financing projects before the pandemic, their loans have been converted into “permanent mortgage financing, usually, but not on our balance sheet,” said the administration.

Meanwhile, rising costs of construction materials and labor have weighed on new project investments and loan proceeds.

Despite those obstacles, the bank reported a decrease in earnings per common share of $ 4.29, a 27 percent jump from the same quarter in 2021 and 21 percent above the third quarter.

That power to make money started from rising prices. The bank saw interest income – the difference between interest paid and interest earned – jump to $150 million or 9 percent in the fourth quarter compared to the same period in 2021.

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