Wells Fargo & Co. warned about shakiness in the commercial real estate market and said it’s reviewing its more than $35 billion portfolio of office loans for ways to decrease risk, Bloomberg News reported. The lender has been boosting its allowance for credit losses on office loans for the past four quarters, Chief Financial Officer Mike Santomassimo said on the bank’s first-quarter earnings call Friday. Provisions ticked higher in the first three months of the year in part because of commercial real estate loans, the bank said in a statement. “The office market continues to show signs of weakness due to lower demand, higher financing costs and challenging capital market conditions,” Santomassimo said on the call. “We expect to see more stress over time.” The bank cautioned that the stress wasn’t yet resulting in meaningfully higher losses. But cities such as San Francisco, Seattle and Los Angeles could face issues given the shift toward remote or hybrid work schedules and lower lease rates, the bank warned. Commercial property owners are facing impending maturities this year on $400 billion of debt after interest rates soared, according to MSCI Real Assets. While banks account for a smaller portion of this year’s maturities than commercial mortgage-backed securities, they have more than 50% of loans coming due in 2026 and 2027, MSCI said.
