National Bank urges increased caution when it comes to commercial real estate

At the same time, there are also headwinds. In general, as in the entire economy, they are falling this year Growth prospects also for local banks. In addition, there are well-known but unresolved problems in lending – especially in the area of ​​commercial real estate.

“The war in the Near and Middle East and the subsequent rise in energy prices have once again led to great uncertainty. This uncertainty and the direct effects of the war on prices are weighing on the growth prospects of almost all industries in Austria and Europe,” says OeNB Governor Martin Kocher.

The OeNB is currently sticking to its March forecast, according to which “subdued” economic growth of 0.5 percent is expected in Austria this year.

However, Kocher sees an “upside risk” for the inflation forecast. If inflation rises sharply, this could prompt the ECB to raise interest rates, which in turn could have a negative impact on lending to private individuals and companies. However, the slightly better growth outlook for Eastern Europe, where banks have around a third of their credit exposure, has a positive effect.

Austria’s banks have in the previous year 11.8 billion euros deserved, the second best year in recent memory. “The vast majority of the good profits were used by the banks to strengthen their capital base. The banking sector’s common equity Tier 1 capital ratio reached a high of 19.0%. This is particularly welcome given the increasing uncertainty in the geopolitical and economic environment,” said Director Thomas Steiner.

In the previous year, lending to private individuals picked up slightly, while lending to companies remained subdued. The non-performing loan ratio (“NPL ratio”) stabilized at 3% across all sectors following recent increases. That doesn’t sound like much, but in total it means around 27 billion euros in bank balance sheets and, depending on the statistics, 3rd or 4th place in the eurozone.

Central problem area

And, especially for real estate loans, the NPL ratio is still rising at 8.3% year-on-year – around three times that of the overall sector. At the end of 2024, this rate of bad loans was still 6.3%.

Since 2022, when interest rates began to rise, Austrian banks have recorded a sharp increase in the NPL ratio on commercial real estate loans (CRE loans). This increase is particularly pronounced in commercial housing, where over 14% of loans are now non-performing. And an additional 12 percent have an increased probability of default, says the OeNB.

In a European comparison, the Austrian banking sector stands out not only because of this increase, but also because of the above-average share of CRE loans in total corporate loans of 43%.

It is positive that the strict criteria of the expired KIM regulation continue to be adhered to in 80 percent of cases for private housing loans.

In order to contain systemic risks, the OeNB therefore recommends that banks:

– appropriate credit risk management, including active management of non-performing loans (including their consistent reduction),
– higher risk provisions (especially for the unsecured part of the loans) and
a conservative valuation of the collateral;
– compliance with stricter regulatory requirements for commercial real estate loans (in particular the sectoral systemic risk buffer);
– securing good capitalization, and above all that

– Further compliance with sustainable lending standards for residential real estate loans

Eva Landrichtinger, Managing Director for Banks and Insurance in the Austrian Chamber of Commerce, opposes new bank levies in view of the necessary budget restructuring. Despite their profits, Austria’s banks are at a clear competitive disadvantage.

Because, says Landrichtinger: “For 15 years, Austria’s banks have been paying an originally temporarily announced levy of 5.8 billion euros (2011-2025). Around 3 billion euros are paid annually in additional taxes, levies and social contributions. However, this amount does not even take into account the enormous regulatory costs that have exploded in recent years. While other European countries are relieving the burden on the financial sector, another one was imposed in Austria in 2025 Increase decided.”