According to Standard and Poor’s (S&P), UK, Irish and Spanish banks will likely continue reporting higher impairment charges on commercial property loans in 2011 even as signs of a property market recovery in the UK grow.

Commercial property loans in these countries could see impairment charges of €92bn in total for 2009-11 with most of the losses from domestic lenders, according to S&P. In addition, some German lenders also remain vulnerable due to their large commercial property loan exposure built before the market’s peak in mid-2007 although this will be less significant than the other three countries.

S&P believes that banks overall leaned towards forebearance – a temporary postponement of repayments – even in the development sector where losses are expected to be much steeper.

The report said: ‘Notably in Spain, we have observed a trend among the banks to proactively acquire troubled residential property portfolios, either to accelerate what may otherwise be a long foreclosure process or to improve security for troubled unsecured exposures.

‘However, we also note that such practices could simply delay loss recognition, as well as the risk that rising interest rates toward late 2010 or 2011 could make such a stance increasingly uneconomic.’