Based on the risk-adjusted returns prevailing in the current market rates, Citi analysts believe commercial real estate construction offers the best risk-adjusted return.
Keith Horowitiz and the team at Citi Research point out that in the current C&I market space, banks have moved from competing on rates to competing on terms.
Competition forces spread compression
The Citi analysts point out that competition across all loan categories remains high, with banks continuing to fight for loan growth. This has in turn resulted in spread compression over the last year.
The following table reveals pressure on spreads:
However, the analysts believe despite pressure on spreads, CRE construction offers the best risk-adjusted returns,...
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