Large Nordic Banks’ CRE: Exposure High but Manageable with Robust Asset Quality, but Risks Are Rising
Banking OrganizationsSummary
DBRS Morningstar has released a commentary discussing the six large Nordic banks’ exposures to Commercial Real Estate sector (Svenska Handelsbanken, Swedbank, SEB, Nordea, Danske Bank and Nordea).
Key highlights include:
• A large amount of unsecured real estate bonds from Nordic real estate issuers mature this year amid a weak and uncertain economic environment for this sector
• Nordic Banks are generally more exposed to the CRE sector than other European peers. Despite the fact that asset quality remained robust at end-Q1 2023, risks are rising and their large exposures make them more vulnerable if the sector deteriorates quickly
• We believe that unless there are spillover effects, the weaker economic environment should not translate into significant losses for the CRE sector, and the impact on banks should be manageable
“We expect Nordic Banks’ CRE asset quality to somewhat deteriorate throughout the rest of 2023 and 2024” notes Maria Parra, Vice President, Global FIG at DBRS Morningstar. “However, we expect this deterioration to be largely manageable for them without affecting their profitability and capitalisation as the Nordic economies are also performing better than initially anticipated