N° 68 : French banks’ lending to the professional real estate sector in the second half of 2015

The second edition of the new survey of the General Secretariat of the Autorité de contrôle prudentiel et de résolution (ACPR) shows that, in a context where activity has been particularly strong both in France and in most European countries since 2010, new lending to the professional real estate sector rose by 33.3% in the second half of 2015 to stand at EUR 62.3 billion. Growth was robust across the board, rising by 29.1% in France, 38% in the rest of Europe and 42.3% in the rest of the world. This increase in new lending mainly benefited investors and property companies, which continued to account for the major share (with 60% in the second half of 2015) ahead of developers and property brokers (38.4%), and retail, which almost tripled. Lending to the office sector (19.1% of the total) grew by 22.8% in H2 2015, while new lending nevertheless remained almost stable between the first and second halves of 2015 in Île de France.

Driven by new lending, banks’ exposures rose by 8.6% in H2 to reach EUR 162.4 billion at end-2015, or 2.64% of their total balance sheet. As in the case of new lending, the increase in exposures was more rapid in the rest of Europe (15.7%) and in the rest of the world (18.1%) than in France (3.3%). The breakdown of exposures by type of recipient confirms the predominance of investors and property companies (47.9%), far ahead of developers and property brokers (24.6%). Lastly, residential real estate continued to account for the bulk of exposures (34.3%), ahead of offices (21.8%).

The quality of exposures has been continually improving since 2010: the amount of gross non-performing loans fell by 5.8% in H2, with the gross non-performing loan ratio falling to 6.79%; due to a slightly faster decline in the amount of impairments, the coverage ratio for these loans decreased marginally but remained at a historically high level (38.6%). Finally, the few indicators providing usable information suggest that risk-taking by the banks in the sample was modest.