Wells Fargo CEO Says Bank May Lose $3B On Office Loans

Wells Fargo Chief Executive Officer Charlie Scharf said on Thursday that the U.S. lender may lose $2 billion to $3 billion on its commercial real estate office loan portfolio. 

“We’ve reserved for all of it, so the balance sheet is de-risked, but it’s going to play out over three, four years,” Scharf said at an event.  

He added that commercial real estate is performing very well overall, adding that concerns about the industry are decreasing as interest rates decline.

“But there are real losses that will be taken because the level of demand is just not going to be what it was (on office loans),” he said, adding that he doesn’t expect CRE to have an impact on any other asset class.

Earlier this month, Chief Financial Officer Michael Santomassimo had warned investors in a post-earnings call that the bank expects losses in the office loan portfolio to be lumpy.

The lender beat analyst expectations in its third quarter earnings.

Scharf also said that the U.S. consumer is doing well.

“Everything is performing exactly as we would expect. Spend levels are up consistently on a year-over-year basis,” he added.

Wells Fargo is also reportedly doubling down on efforts to lift a $1.95 trillion asset cap imposed by the Federal Reserve that prevents the bank from growing until regulators deem it has fixed problems dating back to the 2016 fake accounts scandal.

The asset cap curtails Wells Fargo’s ability to take in more deposits and expand its trading business, two potential growth areas for the bank, CEO Scharf said earlier this year.

(Reporting by Nupur Anand in Washington and Jaiveer Singh Shekhawat in Bengaluru; Editing by Alan Barona and Lisa Shumaker)