Jan. 13 (Bloomberg) -- Synovus Financial Corp.,Comerica Inc. and Huntington Bancshares Inc. are among regional banks that may face a second wave of real-estate loan losses, this time for shopping centers and residential construction projects.

Losses in commercial real estate excluding construction are expected to increase 10-fold, Deutsche Bank AG analyst Mike Mayo said in a Jan. 5 research note. Moody’s Investors Service said yesterday it’s considering a downgrade of Synovus because of commercial real-estate losses.

Borrowers have fallen behind on payments to regional lenders as the year-old recession shutters retail stores and offices. Overdue commercial real-estate loans quadrupled from two years earlier in the third quarter to 4.73 percent, according to seasonally adjusted data from the Federal Reserve. That’s the highest level since 1994.

“We’re overbuilt in a lot of areas like shopping malls,” said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland. Apartment developments are also suffering as falling home prices draw people away, he said. “The fundamentals are on the verge of going really, really negative for commercial,” McCain said.

Losses are likely to get worse because overdue commercial construction loans, an early indicator of future defaults, are rising, according to Mayo. Developers may not be able to refinance “hundreds of billions of dollars” in loans because there aren’t any willing lenders, said Sandler O’Neill and Partners LP analysts led by Mark Fitzgibbon in a Jan. 5 note.

‘Marginal Deterioration’

Portfolios for commercial real estate and commercial and industrials loans are so big that “even marginal deterioration could translate into large dollars of new losses,” Fitzgibbon wrote.

Synovus, which reports quarterly results on Jan. 22, said Jan. 2 that losses on loans and uncollectible debt will “remain at elevated levels.” The Columbus, Georgia-based company plans to reserve about $250 million to help cover Atlanta real-estate loans. The bank said in November it would sell the U.S. government’s Troubled Asset Relief Program $973 million in preferred stock and warrants.

The lender has had five quarters of lower profit and losses, and its stock has fallen 44 percent in 12 months, compared with 28 percent for the KBW Regional Bank Index. The bank’s real-estate loan portfolio makes up 78 percent of total loans, according to Deutsche Bank data. Almost a fifth of loans are in commercial real-estate projects like shopping centers and hotels, Synovus spokesman Patrick Reynolds said in an interview Jan. 6.

‘Stopped Lending’

Synovus “stopped lending to any new projects in the retail sector, in the shopping sector, or the hotel sector” in June, Reynolds said. He said the bank hadn’t seen any deterioration in the loans, and cut off lending after seeing the plunge in home and auto sales.

Comerica, which has matched Synovus in the number of quarterly profit declines, is wrestling with losses on loans to builders in Florida and car buyers in Michigan. The Dallas-based bank had $7 billion in commercial real-estate loans at the end of its third quarter out of a total portfolio of $51.5 billion, and about half the bank’s $116 million of uncollectible debt for the period was in commercial real estate, Comerica spokesman Wayne Mielke said in an e-mailed statement.

The charge-offs are “primarily related to the California residential real-estate development sector,” Mielke said.

Comerica Declines

Comerica’s stock is down 62 percent in one year. Analysts surveyed by Bloomberg have estimated fourth-quarter profit fell 64 percent. The bank in November said it would sell the government $2.25 billion in preferred shares and warrants to buy 11.5 million common shares.

Huntington has a $2.2 billion retail property portfolio and an additional $4.6 billion in auto loans and leases on its books that could become “sources of concern in the coming quarters,” KBW Inc. analysts led by Brian Klock said in a Dec. 17 note.

“Given Huntington’s footprint, the aforementioned credit pressures are likely to exacerbate as the Midwest economy continues to deteriorate,” Klock wrote. Loans no longer accruing interest jumped 10 percent in the third quarter, “with most of the increase in commercial real-estate loans and commercial and industrial loans,” Columbus, Ohio-based Huntington said in October.

Huntington is scheduled to report earnings on Jan. 22, with analysts predicting the bank will report a 41 percent decline in profit. The stock fell 52 percent in 12 months, and won preliminary approval in October to sell a $1.4 billion stake to the government, raising the bank’s Tier 1 capital ratio to 11.9 percent. A bank must have a Tier 1 ratio of at least 6 percent to be considered well capitalized by regulators.

‘More Conservatively’

The bank tends to “manage our credit more conservatively,” said spokeswoman Jeri Grier. “That process and that conservative nature have served us fairly well in these difficult times, and that hasn’t changed.”

“There’s still a lot of downside for commercial real estate,” McCain said, adding that commercial real-estate delinquencies are already rising. “A huge number of retailers are on the brink, and that all feeds back right into the face of commercial real estate.”

To contact the reporter on this story: Linda Shen in New York at lshen21@bloomberg.net

Last Updated: January 13, 2009 08:58 EST