The Real Deal New York

Wells Fargo, JPMorgan Chase doubled down on CRE in Q2

Commercial real estate loan books grew more quickly than overall assets

July 15, 2016 02:00PM
By Konrad Putzier

One Vanderbilt rendering (inset: JPMorgan Chase's Jamie Dimon and Wells Fargo's Alan Wiener)

One Vanderbilt rendering (inset from top: Wells Fargo’s Alan Wiener and JPMorgan Chase’s Jamie Dimon)

Wells Fargo and JPMorgan Chase expanded their overall commercial real estate loan portfolios in the second quarter amid a challenging lending environment, according to earnings statements released this week.

Wells Fargo’s commercial real estate mortgage balance in the second quarter was $126.1 billion – up 11.5 percent from $113.1 billion a year ago. The figures denote the average balance over the course of the quarter.

The company’s overall interest-earning assets grew at a slower rate of 8.4 percent, meaning commercial real estate loans now take up a bigger share of Wells Fargo’s portfolio than they did a year ago. Its construction loan balance also increased year-over-year, from $20.8 to $23.1 billion.

The average interest rate, however, fell from 3.48 to 3.41 percent for commercial mortgages and from 4.12 to 3.49 for construction loans.

JPMorgan Chase’s commercial banking division, meanwhile, held $18.4 billion in real estate loans (on average) on its books over the second quarter, up 34 percent from $13.7 billion in the second quarter of 2015. While real estate loans made up 8.8 percent of the bank’s commercial loans a year ago, they now accounted for 10.4 percent.

Both banks saw their overall profits dip slightly, due in part to lower interest rates across the globe. Ten-year treasury yields were at a near-record low of 1.58 percent at the time of publication, down from 2.28 percent a year ago. Lower interest rates tend to make it harder for banks to earn a profit on their loans.

The two banks are among New York City’s most active commercial real estate lenders.  Wells Fargo holds a dominant position in the multifamily lending market and last year financed the Blackstone Group and Ivanhoe Cambridge’s $5.3 billion acquisition of Stuyvesant Town-Peter Cooper Village with a $2.7 billion Fannie Mae loan.

JPMorgan Chase, meanwhile, recently funded French billionaire Marc Ladreit de Lacharrière’s $525 million acquisition of 693 Fifth Avenue with a $259 million loan.

Both banks are reportedly part of a consortium that will finance SL Green’s office project One Vanderbilt with a $1.5 billion loan.

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