PrivateBancorp targets toxic commercial real estate loans

By Reuters
Posted Jan. 25 at 4:56 p.m.

PrivateBancorp Inc.’s quarterly profit beat analysts’ estimates as its loan loss provisions halved and the lender expects to reduce its exposure to toxic commercial real estate loans this year.

The bank’s shares rose as much as 7 percent, to a high of $16.09, Tuesday morning on the Nasdaq. They pared some of the gains to close up 1.2 percent, at $15.19,  at nearly three times the usual volume.

Last year 157 banks failed in the United States, with small banks making up the bulk of closures, largely in part due to their high exposure to the commercial real estate  sector.

PrivateBancorp said it has a high number of commercial real estate loans on its balance sheets that will mature this year and expects real estate-owned  loan levels to remain high.

“Their non-performing assets were relatively flat year-end, and their credit quality is also stabilizing. So, though the metropolitan Chicago real estate market is still under pressure, PrivateBancorp with its improving credit metrics will perform better than peers in 2011,” Stifel Nicolaus analyst Anthony Davis told Reuters.

The lender said it will focus more on commercial and industrial (C&I) loan growth.

Those loans increased 6 percent in the October-December quarter, and CRE and construction loans fell 5 percent.

“Their positive loan growth this quarter has primarily been driven by higher origination of C&I loans,” Sandler O’ Neill analyst Daniel Arnold said over phone.

Net loan growth was $122.2 million in the quarter.

The company said in a conference call that it sees net interest margin under pressure this year due to the current interest rate environment.

NIM was 3.36 percent in the fourth quarter, off from 3.48 percent a year earlier.

Provisions for loan losses, excluding covered loan provision, fell 50 percent, to $34.5 million.

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One comment:

  1. Paul S Jenkins Jan. 26 at 5:17 a.m.

    Thank you for the information. I’ll be keeping an eye on PrivateBancorp and see how they do in 2011.

    Michael J. Libow. Real estate agent.