Three of Germany’s five largest specialised commercial real estate lenders have substantial exposure to the UK CRE market and could be hit hard by a no-deal Brexit, Moody’s Investors Service said Tuesday in a new report.
The three German CRE lenders have maintained their exposure to the UK CRE market at well above 1.5x their Common Equity Tier 1 (CET1), while German banks’ overall exposure to UK corporates (including real estate) has dropped by 40% since the Brexit vote.
“Despite their exposure, all three banks have been cautious in providing new lending to UK CRE borrowers, and so have maintained or reduced their exposure in euro terms,” said Mathias Kuelpmann, a Moody’s Senior Vice President. “An average loan-to-value of 60% or below also provides investors with an additional cushion in case of a downturn.”
The three banks in question are Aareal Bank AG (A3 / A3 stable, baa3), Deutsche Pfandbriefbank AG (pbb; unrated) and Deutsche Hypothekenbank AG (Deutsche Hypo, Baa2 / Baa2 review for upgrade, b2 review for upgrade).