By Nupur Anand and Saeed Azhar
NEW YORK (Reuters) – Wells Fargo & Co’s Chief Executive Officer Charlie Scharf said on Wednesday that there will be losses in the office loan space but the lender was proactively managing its portfolio.
“We will see losses, no question about it. But in the context of the overall portfolio and the overall size of our loan portfolio with the company, we are not overly concentrated in office (loan space),” Scharf said while speaking to investors at a conference.
The bank’s outstanding commercial real estate (CRE) loans stood at $154.7 billion, or 16% of total loans, with $35.7 billion in office loans at the end of March.
Office loans have posed concerns for some lenders as property values decline and more borrowers default on their loans. Rising interest rates, a looming recession and the proliferation of remote working have further clouded the outlook.
Scharf also said that consumer spending remains strong but the bank has tightened credit in its card business in areas where the lender was beginning to see early signs of weaknesses.
The San Francisco-based bank set aside $1.21 billion in the first quarter to cover potential loan losses, compared to $787 million a year earlier.
Banks have been building rainy day funds to prepare for a recession that bankers and economists predict will occur in the second half of the year.
(Reporting by Nupur Anand and Saeed Azhar in New York; editing by Jason Neely and Nick Zieminski)
