Easy Risk Evaluation

The now half-empty San Francisco
Centre was filled in 2003

It's no surprise that banks are experiencing losses on property loans in U.S. cities: [bold added]

two banks that have reignited worries about property lending in recent days are one based in the New York region, New York Community Bancorp, and one based in Japan, Aozora Bank. Shares of both banks plunged this past week after they reported increased credit concerns related to commercial property risks in the U.S...

At Aozora, the at-risk property loans identified were concentrated in big cities. Of the 21 nonperforming U.S. office loans, with $719 million outstanding, that it reported this past week, the largest chunks by city were $171 million in Chicago and $127 million in Los Angeles. “The volume of property sales remains very low,” the bank wrote about Chicago’s office market in a presentation.

In a January report, Moody’s Analytics found the biggest percentage-point increase in office vacancies among U.S. metro areas over 12 months was in San Francisco, followed by Austin, Texas.

Other concentrations of problematic real estate loans were in New York and Los Angeles. Note: every single one of the cities named in the article has a Democratic mayor. Were your humble blogger a bank risk officer he would simply deny real estate loans to cities that had Democratic leadership. (Yes, I'd miss out on some profits in, for example, Knoxville, TN or Columbia, MD, but in banking big write-offs are to be avoided more than profits on risky loans are sought). Then I'd go home and have an untroubled sleep.