Credit quality

More details have emerged about the damage the coronavirus pandemic is inflicting on the hospitality industry. One servicer alone has received 2,000 workout requests in the past month.

By helping borrowers now, banks hope customers can quickly catch up on payments once the coronavirus pandemic ends. If they can’t, interest income will remain low and charge-offs could pile up if the crisis drags on.

Commercial real estate lenders have to consider not only how they’ll weather the COVID-19 downturn, but whether worker and consumer habits have changed for good.

The largest bank in Puerto Rico said hundreds of millions of dollars of its mortgages and consumer loans are tied to the parts of the island hit by the recent quake or still recovering from two hurricanes.

Susan Riel succeeded Ronald Paul as CEO of the Maryland bank shortly before questions surfaced about credit quality and lending practices.

Such credits, which reflect borrowers with financial challenges, increased significantly during the third quarter.

Shares in the lender fell after it reported lower third-quarter profits, said nonperforming assets rose and cautioned that it had lost multifamily loan deals to competitors offering easier terms.

Caught in the middle of a credit-subsidy debate, the program would have shut down on Tuesday without congressional action.

The popular program could go idle next month for the second time in less than a year if lawmakers are unable to approve a $99 million credit subsidy.

It’s hard to time the next economic slowdown. But lenders, many with lingering memories of the financial crisis, are taking steps now to limit exposure in commercial real estate, construction and other loan segments.