Commerical Real Estate will hit Banks Hard said Financial Expert Robin Trehan

PRLog (Press Release) – Jun 14, 2009 – Financial Expert Robin Trepan said Commercial Real Estate will hit Banks hard. More banks will fall in the 3rd and 4th quarter. The aspect of commercial real estate has not being even felt on the bank books.

Robin Trehan said we are not out of woods. We are only 40% in the crisis. The rest of 60% will affect more. He said consider a situation. If you own a commercial real estate for $10 M, and you had 20% down in it. So, the loan on it was for $8 M. Now the present value of the property is only $6M. Owner has already lost the equity in the deal.

If the owner goes to the bank and even able to renegotiate the loan at $5.5 M. Think over what is actually happening and how the banks will suffer. On a loan of $8 M bank took a hit of 31% when the reduced the loan from $8M to $5.5 M. Remember, bank has approx. only 8.5 in Tier 1 capital at best. If the bank has concentration of commercial loans and even if 20% of them will default it will bring down lots of commercial banks in next 6 months.