Deutsche Bank unloading US$1 billion in US real estate loans

DEUTSCHE Bank is trying to offload up to US$1 billion in US commercial property loans off its balance sheet, just as rising interest rates have dented profits in its real estate portfolio, according to people familiar with the matter. 

The Frankfurt-based bank is marketing the loan book to unlock some capital relief, said one of the people, who asked to not be identified because the details are not public.

Deutsche Bank is a big lender to developers of US commercial real estate, and especially offices. It had US$16 billion in loan exposure to US commercial real estate at the end of the second quarter, with US$7 billion of that linked to offices.

Credit provisions for the asset class doubled from a year earlier, according to an investor presentation published last week, a sign that the bank will need to do more to ease the pressures on its holdings.

The transaction “is a regular part of our book management strategy” and the bank has “completed a number of similar transactions over the last years”, a spokesperson for the lender said by e-mail.

The commercial property market has been hard hit by higher borrowing costs. US offices are among the worst performers, as they have also experienced higher vacancies on the back of higher rates of remote working. BLOOMBERG