Wells Fargo, JPMorgan Chase doubled down on CRE in Q2

Commercial real estate loan books grew more quickly than overall assets

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

Sign Up for the undefined Newsletter

By signing up, you agree to TheRealDeal Terms of Use and acknowledge the data practices in our Privacy Policy.

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.