Real estate and construction loans are one of the main categories of big loans that are in trouble, according to federal banking regulators. The annual survey of $2.9 trillion in “shared national credits” (SNCs) — loans of $20 million or more shared by at least three federally regulated banks — revealed that $643 billion, or 22.3 percent, are “criticized assets,” meaning they are classified as special mention, substandard, doubtful, or loss. Of these, $72 billion, or 11.2 percent of the “criticized assets,” are in real estate and construction, ranking the industry third after media and telecoms with $112 billion (17.3 percent), and finance and insurance with $76 billion (11.7 percent).

The 2009 level of criticized assets compares with $373 billion in 2008, when it represented 13.4 percent of last year’s portfolio. The severity of criticism increased this year, however, with the volume of SNCs classified as doubtful and loss rising to $110 billion from only $8 billion in 2008. Loans in nonaccrual status also increased nearly eight times to $172 billion from $22 billion. Nonaccrual loans included $32 billion in credits classified as loss and $56 billion classified doubtful. Classified assets, which include SNCs classified as substandard, doubtful, or loss, rose to $447 billion from $163 billion, representing 15.5 percent of the SNC portfolio, compared with 5.8 percent in 2008. Classified dollar volume increased 174 percent from a year ago. Lenders in these shared loans may also include foreign banks and non-bank institutions such as hedge funds. In fact, 47 percent of the classified volume is held by non-banks, even though they hold only 21.2 percent of the SNC assets, while banks accounted for 30.2 percent of classified assets while holding 40.8 percent of the SNC portfolio. The 2009 review covered 8,955 credits extended to approximately 5,900 borrowers.