April 14, 2024
Charlie Munger says banks ‘full of’ bad loans on commercial property: report

Charlie Munger says banks ‘full of’ bad loans on commercial property: report

“‘It’s not nearly as bas as it was in 2008. But trouble happens to banking, just like trouble happens everywhere else. In the good time, you get into bad habits…When bad times come, they lose too much.’”

— Charlie Munger, vice chair, Berkshire Hathaway

That’s Charlie Munger, the 99-year-old vice chair of Berkshire Hathaway Inc. BRK.A, +0.64% BRK.B, +0.71%, in an interview with the Financial Times published Sunday, in which the newspaper said he warned that U.S. banks are “full of” bad loans on commercial property.

Munger observed that banks were already retreating from commercial property, telling the FT that “every bank in the country is way tighter on real-estate loans today than they were six months ago.”

Munger will again appear with Berkshire Chairman and Chief Executive Warren Buffett at Berkshire’s annual meeting on Saturday,

Related: Why First American Trust’s chief investment officer sees no quick end to regional-bank turmoil

The failure of Silicon Valley Bank and Signature Bank in March sparked worries over the banking sector, particularly regional banks, as investors pulled deposits. SVB’s collapse put a spotlight on potentially painful losses lurking at banks from trillions of dollars in commercial-real-estate loans on their books.

Meanwhile, the focus over the weekend was on First Republic Bank FRC, -43.30%, which had struggled to recover from a sharp drop in deposits. JPMorgan Chase & Co. JPM, +0.87% won a weekend auction for the troubled lender, which was seized by regulators in the second-largest bank failure in U.S. history.

See: JPMorgan to take over First Republic after fourth bank failure of the year

Stock-market investors last week largely brushed off banking jitters. Major U.S. stock indexes DJIA, +0.80% SPX, +0.83% COMP, +0.69% rose Friday, while the Cboe Volatility Index VIX, +3.80%, sometimes referred to as Wall Street’s fear gauge, ended at a nearly 18-month low.

U.S. stock-index futures saw little movement. Futures for the S&P 500 ES00, -0.07% and Nasdaq-100 NQ00, -0.13% were down 0.1%, while futures on the Dow industrials YM00, +0.01% were flat.

Need to Know: Watch for a Fed pause, a debt-ceiling battle and a volatile summer. Shelter in these stocks, says strategist.


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