Commercial real-estate problems may be about to halt the recent rally enjoyed by US regional banks.

As banks start releasing fourth-quarter earnings this week, the losses and reserves tied to commercial real-estate loans could spike even higher than some analysts think. Regional banks could get hit hardest, given typically greater exposure to commercial property than their bigger brethren.

The stress is building. This month, Reis Inc., a market research firm, announced sharp declines in rents and occupancies in all property classes, giving landlords less cash flow to service debt. Foresight Analytics estimates delinquencies on commercial real-estate loans held by banks will rise to 9.47% in the fourth quarter, up from 5.49% a year earlier.

This could interrupt the 15% jump since early November in the KBW Regional Banking ETF, which tracks regional bank shares.

Wall Street Journal