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Deutsche Bank’s Chief Executive Officer, Christian Sewing, anticipates that the ongoing crisis in commercial real estate will persist throughout 2024.
Sewing made this projection during a financial conference, emphasizing that loan loss provisions are likely at the upper end of the bank’s estimated range.
Challenges in Commercial Real Estate:
Sewing expressed skepticism about the possibility of significant relief for the challenges facing the commercial real estate sector in the coming year.
As Germany’s largest lender, Deutsche Bank holds the highest volume of outstanding loans to the commercial real estate sector among its domestic competitors, highlighting its vulnerability to the sector’s struggles.
Impact of High-Interest Rates and Office Vacancies:
In the United States, where Deutsche Bank is active, the commercial property faces considerable pressure exacerbated by high-interest rates and increasing office vacancies.
Sewing noted that while there hasn’t been a further deterioration in the sector, there are also no indications of significant improvements.
Bank’s Mitigation Measures:
Deutsche Bank is actively engaging in early extensions and restructurings with borrowers to help them navigate the challenges of the commercial real estate market.
These efforts aim to address potential defaults and mitigate risks associated with loan portfolios.
Projections for Credit Loss Provisions:
The bank had previously forecasted provisions for credit losses in 2024 to range between 25 to 30 basis points of loans.
However, Sewing indicated on Tuesday that provisions will likely lean towards the higher end of the range due to the current global economic environment.
