Merrill Lynch Reveal Top Aggressive Property Loans Providers

Wed, 19 Mar 2008

UK banks HBOS, Royal Bank of Scotland, Anglo Irish Bank and Allied Irish Banks have the most aggressive lending standards in the UK commercial property market, a new survey of valuers has revealed.

Analysts at US investment bank Merrill Lynch said the aggressive property loans findings, which were published in a survey note last week, were "less reassuring" than had been expected.

The note said: "The UK commercial real estate bubble is bursting and the banks are going to lose money . The question that investors want answered now more than ever is how good, or bad, has underwriting been and how much money will lenders lose as a consequence?"

Merrill Lynch said the survey was carried out between January 29 and February 8 and covered 13 of the UK’s 17 biggest commercial property valuation firms .

The bank added that tenant demand for space in the UK was a key factor in determining how low prices for commercial property could go and how high the risks to creditor banks might be.

"Bank earnings will be impacted by record capital value declines, but the key to asset quality is the occupier market," the note said.

"Here, the credit crunch impact is unclear and while we do not expect a repeat of the disastrous London office market of the early 1990s, the outlook is challenging."

Stating its conservative lending policy, a spokeswoman for Allied Irish Banks said: "Merrill says the Irish banks are more relationship driven. We would be well known as a very relationship driven bank with a conservative lending policy and while we may have done some big individual deals you need to look into the lending practice behind them which you'll find is conservative."

The note comes after record bank lending to Britain's real estate industry and a post-summer decline in commercial property which has already trimmed 14 per cent off capital values.
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