December 9, 2023

Charles Munger at the Berkshire Hathaway annual shareholder meeting on April 29, 2022 in Omaha, Nebraska.

David A. Grogan | CNBC

Charlie Munger believes that the US commercial real estate market will face trouble.

The 99-year-old investor told Financial Times U.S. banks are flooded with “bad debt,” and those loans will be vulnerable as “bad days come” and real estate prices fall.

“It’s not as bad as it was in 2008,” he told the Financial Times in an interview. “But there’s going to be trouble in the banking industry, just like there’s going to be trouble everywhere.”

Munger’s warning comes as U.S. regulators have given banks until Sunday afternoon to make their best and final bid for First Republic, the latest in a turbulent period for mid-sized U.S. banks.

Since Silicon Valley Bank collapsed in March, attention has turned to First Republic as the weakest link in the U.S. banking system. The bank’s shares fell 90% last month, then fell further this week after First Republic revealed how badly it was.

Berkshire HathawayMunger, who serves as vice chairman, remains largely on the brink of crisis despite a history of supporting U.S. banks during turbulent times. Munger, who is also a longtime investment partner of Warren Buffett, attributes Berkshire’s restraint in part to the risk that the bank’s large commercial real estate loans may pose.

“A lot of real estate isn’t that great anymore,” Munger said. “We’ve got a lot of distressed office buildings, a lot of troubled shopping centers, a lot of other properties that’ve been troubled. There’s a lot of pain out there.”

Read the full FT interview here.