S&P Cutting Outlooks On US Regionals, More Negatives For Aareal, DePfa

S&P has put outlook downgrades out for five US regionals on the basis of office space exposure – likely unhelpful for Aareal & DePfa but already known issues.

• S&P has cut the outlooks to negative (from stable) for M&T, Synovus, Trustmark, First Commonwealth and Valley National. The agency cites increases in non-performers, loan maturities and “an eventual material deterioration” in performance. These banks have 25-55% of lending in CRE, according to S&P.
• US CRE issues, specifically offices, is no secret and the travails of NYC Bancorp are testament to that – even today’s FPC minutes from the UK BoE cited office CRE as a specific risk factor.
• Aareal and DePfa have been front-and-centre of concerns over this area – hardly a surprise with real estate financing is their raison d’etre. DePfa’s IG seniors are streaming c.4bp wider (against peers slightly tighter), Aareal’s are 2bp wider and a range of property-linked firms are clear underperformers today already.