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Following Signature Bank’s announcement Wednesday that it expected to cut back on lending for multifamily and other commercial real estate assets, M&T Bank today said it anticipates making fewer CRE loans this year as a result of higher interest rates.
Interest rates, raised in an attempt to beat back record-high inflation, have contributed to a drop in investment volume from the highs of 2021 and early 2022, slowing CRE deal volume.
M&T’s commercial real estate loan balances declined by 2% — about $830M — in the second quarter, The Real Deal reported. M&T Chief Financial Officer Darren King said on an earnings call this week that those reductions were “due to almost equal reductions in construction and permanent loans.”
“With rates moving, it's affecting cap rates and asset values,” King said. “And so you're starting — you're not seeing the turnover in properties like you might have under normal circumstances. And that will affect the pace of decline and our growth in permanent CRE.”
Expected slowing in the construction industry also factored into the bank's decision.
“We continue to reduce our construction exposure because there’s a lack of new activity to offset the conversion of construction loans into permanent mortgages,” King said in the earnings call.
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