In 2009, the first year of Ernst & Young’s survey of investors in commercial real estate NPLs (commonly defined as 90+ days past due or in non-accrual status), US banks were slow to sell NPLs. While they stepped up sales in 2010 and again in 2011, they so far have sold only a small percentage of the NPLs on their balance sheets, and they continue to hold more than US$300 billion of distressed loans.
The pressure on banks to sell more NPLs could increase in 2012. Starting this year, an estimated US$800 billion to more than US$1 trillion of commercial real estate loans will mature over the next five years, and analysts estimate that a third of the borrowers will be unable to pay off or refinance their loans. This could increase the risk that more NPLs could be added to banks’ balance sheets. Furthermore, commercial property markets that saw strong growth at the beginning of 2011 began to weaken in the final months of the year. The forecast for 2012 is mixed, with some market observers concerned that property values could level off or even start to decline, while others are forecasting growth. This uncertainty could cause some banks that had been holding NPLs in the expectation of a continuing property market recovery to instead decide to sell them.
Source : Ernst & Young