Stress Testing of Real Estate Credit Portfolios in the Corporate Segment under Macroeconomic Shocks

This diploma thesis examines bank financing of real estate businesses, with a focus on credit risk and its sensitivity to adverse economic developments. The theoretical part defines the specific features of real estate financing, the main sources of credit risk, and the importance of the LTV and DSCR ratios. The empirical part first uses a model loan to illustrate selected mechanisms related to amortisation and refinancing risk and subsequently applies stress testing to a synthetic portfolio of 1,000 corporate real estate loans. The impacts of a decline in property values, a decrease in operating revenues, and an increase in interest rates are analysed separately, followed by an assessment of their simultaneous effects in a combined scenario. The results demonstrate the distinct transmission mechanisms of the individual shocks and highlight the importance of the simultaneous deterioration in debt-servicing capacity and insufficient collateral coverage for the emergence of modelled credit losses. The sensitivity analysis further supports the robustness of the identified relationships to changes in the severity of the stress scenarios. The thesis thus demonstrates the use of stress testing as a tool for analysing credit risk in a real estate financing portfolio.