(Bloomberg) -- Deutsche Bank AG has entered talks to sell close to $1 billion in loans linked to commercial real estate while indicating the market has bottomed out.
The German lender has been “encouraged” by indicative pricing on the loans, Chief Financial Officer James von Moltke said on an earnings call with analysts Wednesday, confirming a Bloomberg report in August. It has made a provision of €23 million in anticipation of the sale, he said, adding that the deal hasn’t closed yet.
The prospective transaction provides “further evidence of our view that commercial real estate has at least found a floor and is stabilizing,” von Moltke said.
Deutsche Bank’s loans to developers of US commercial real estate — and offices in particular — have long attracted investor scrutiny. The lender had €15 billion in CRE exposure at the end of the third quarter, down from €16 billion in the previous three-months period. Risk provisioning for the asset class was €68 million, the lowest level in a year.
The commercial property market has been hard hit by higher interest rates, which have raised borrowing costs and weighed on valuations. US offices have been among the worst performers.
Almost 40% of the loan portfolio Deutsche Bank has put on the market is non-performing, von Moltke said on the earnings call.
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