M&T Banks says it is conducting "stress tests" on the debt-service ratio of CMBS loans that make up its $5B office portfolio, disclosing that 20% of its office loans are criticized—banking jargon for in distress, potentially in default.
"We're going through all of the office portfolios and stressing both the vacancy rates and lease rates to see what the debt service coverage ratio is. We're making sure that we've got adequate coverage," said Darren King, M&T's CFO, according to a transcript of the Buffalo-based bank's Q4 earnings call.
"If we talk about our expectations for charge-offs as we go into this year, that's the place where we'd have the most concern," the CFO said, referring to office loans that may be written off as losses when the bank believes it can't collect on the debt.
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