The headline conclusion from the IMF’s latest Global Financial Stability Report is good news for banks. The organisation trimmed US$500bn from its estimate for global bank writedowns between 2007 and 2010. Lenders are now expected to write down asset values by US$2.3trn over this period, less than the US$2.8trn projected in the IMF’s analysis six months ago.
Although conditions are improving, many risks remain. One particularly worrying risk, the IMF highlights, is exposure to commercial real estate. In the US, for example, the peak in writedowns for corporate and consumer loans has already been reached, according to estimates from the IMF and Federal Reserve. Loan losses on residential real estate loans, meanwhile, should peak in the third quarter of this year. Writedowns on commercial real estate loans, however, are expected to keep rising until the second half of 2011.