This is part two of a four-part series on multifamily bank lending
In the first of our four-part series on bank lending for multifamily, we highlighted the remarkable growth in outstanding multifamily loans issued by commercial banks. Among all bank lending categories, none has grown faster than multifamily over the last six years. Multifamily as a share of overall lending has surged to a 20-year high.
So this is where you might expect to see that the megabanks gobbling up most of the multifamily market share. That’d be a logical hypothesis given the consolidation wave among banks in recent years, helping the biggest banks get even bigger. And that’s what happened with the overall loan pool. Excluding JPMorgan Chase (we’ll explain why a little later), the 31 banks with more than $50 billion in assets and that existed for at least six years in present form own 54.6% of all outstanding loans as of Q2 2014. That’s way up from Q2 2008, when those same banks owned 44.6% market share – up 1000 bps.
And yet … when it comes to multifamily, we haven’t seen growth anywhere near that level. Those same big banks own 25.6% of the multifamily loans, up just 63 bps since Q2 2008.
Instead, the multifamily boom has been fueled by the hundreds of banks with $1 billion to $50 billion in assets – large banks, but outside the top 35. Of note:
- This group (using a same-store dataset) has seen its market share of multifamily loans balloon 1500 bps, from 27.3% to 42.3%, since Q2 2008. By comparison, their share of the overall bank loan pool has grown just 540 bps to 21.6%.
- In dollar terms, this group has more than doubled its multifamily portfolio over the past six years – up 106% to nearly $119 billion.
- Over the past five years, who has gained the most market share, on net, in multifamily bank loans? (The five-year timeframe gets us past 2008’s mega-mergers, which skew the rankings.) Seven of the top 10 banks on this list rank outside of the nation’s 35 biggest by asset size. And #1 on the list is Signature Bank, the nation’s 53rd largest bank by total assets, which has been steadily expanding its multifamily portfolio since the end of 2007.
- Signature Bank isn’t alone. Of the top 11 net gainers of market share within the multifamily bank loan pool over the last five years, eight rank outside the nation’s 35 biggest banks.
- Signature Bank now ranks sixth nationally for market share of outstanding multifamily bank loans. Other non-megabanks in the top 10 are New York Community Bancorp (the nation’s 36th-biggest bank), Investors Bank (#72) and First Republic Bank (#37).
For banks with $1 billion to $50 billion in assets, multifamily is becoming much a bigger piece of the portfolio. Multifamily as a share of total loans jumped 240 bps up to 6.8% over the last six years in this group. By comparison, among the nation’s biggest banks (again, sans JPMorgan), multifamily’s share registers at only 1.6% — up just 10 bps.
Why do we keep excluding JPMorgan Chase? Well, it’s the exception among its megabank peers. It wasn’t always a big player in multifamily, but it’s become the pre-eminent player – starting with its acquisition of Washington Mutual in 2008. Since then, JPMorgan has continued to grow its multifamily portfolio – gaining 149 bps in market share over the past five years. As of Q2 2014, JPMorgan owns an industry-leading 16.7% of all multifamily bank loans. No other bank has even half that share.
So, who’s leading the retreat in the other direction? Two megabanks – Bank of America and Citigroup. The pair has dramatically shed multifamily since Q2 2008, down 127% in terms of outstanding loan balances. By comparison, overall loan balances in those banks are down only 8%, so multifamily has taken an outsized hit. Combined, their market share of multifamily loans has plunged 583 points over the last five years.
Are the megabanks right to sit on the sidelines?
In Part 3 of our series, we’ll look key indicators that could tell us whether the apartment sector is headed toward a bubble.
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