The Austrian National Bank (OeNB) continues to express concerns regarding the commercial real estate sector, citing increasing risks. Starting mid-2025, banks will be required to implement a new capital buffer for this segment. In contrast, the residential real estate sector remains stable due to the KIM-VO regulations. Overall, a weak economic environment is dampening credit demand, according to the latest financial stability report.
The credit quality in the commercial real estate sector has further deteriorated, with non-performing loan (NPL) ratios projected to rise to 5.5% by mid-2024, doubling since the low of 2020. This increase has been particularly notable since 2022.
Conversely, the NPL ratio for the overall sector remains below 3%, while the residential sector is significantly lower at under 2%. The risks in residential real estate have been stabilized by stricter lending rules in Austria (KIM-VO), with sustainable loans currently accounting for over 80% of the segment.
Despite the weak economy, which has led to cautious investment from companies, the banking sector's profitability remains high. In the first half of 2024, banks reported a cumulative profit of €7 billion, bolstered by foreign operations, which now constitute 40% of total balance sheets. Profits from Austrian banks in Central, Eastern, and Southeastern Europe increased by just over €3 billion.
However, the OeNB advises banks to exercise caution in profit distributions to strengthen their capital base further. Additionally, institutions must prepare for stricter supervisory rules for commercial real estate loans, with a sectoral systemic risk buffer of 1% set to be introduced for loans in this sector.