Outlook for US Banks After the Fed Pivot

Apollo Chief Economist

The banking sector is facing a number of headwinds from a 40% decline in the price per square foot for office because of higher interest rates and more people working from home, $3 trillion in CRE holdings, and $684 billion in unrealized losses on Treasuries and mortgages, see charts below. The net result is a continued decline in the weekly data for bank lending, see the last chart below.

Our latest banking sector chart book is available here.

Source: Apollo Chief Economist
Price per square foot for US offices is down 40% from peak
Source: RCA, Bloomberg, Apollo Chief Economist
The amount of office space per worker has been declining
Source: REITS, BLS, Bloomberg, Apollo Chief Economist (Note: Office using employment includes professional and business services, Information and Financial activities)
US banks hold half of CRE debt outstanding
Source: S&P Capital IQ, Apollo Chief Economist
Unrealized losses on investment securities for banks
Source: FDIC, Apollo Chief Economist
Unrealized losses making up more than 30% of bank equity capital
Source: FDIC, Haver Analytics, Apollo Chief Economist
Weekly Fed data shows small and large bank lending growth slowing
Source: Federal Reserve Board, Haver Analytics, Apollo Chief Economist

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