According to a survey of U.S. banks, there is only a modest concern regarding retail exposure, despite the rising number of distressed retail and apparel companies, Moody's said in a June 8 report.
The rating agency surveyed 39 rated banks, which had median retail loans outstanding that were 36% of tangible common equity and 4.7% of total loans. Median total commitments to the retail industry, including outstanding loans, were 55% of tangible common equity among the group.
While 63% of the respondents said they were "somewhat concerned" about credit trends in the retail sector, concerns were more regarding the competition posed by online retailers and the need for brick-and-mortar retailers to cut down on physical stores. Roughly half of respondents said they are projecting a modest reduction in retail exposure over the next three years, and they estimate that there will only be modest pressure on the asset quality of their retail portfolios in the next 12 months.