The media reports that Wells Fargo management expects that the activities of this financial institution in the field of real estate lending will have a negative result in the form of losses.
The bank’s CEO Charlie Scharf, according to media reports, last Wednesday, May 31, at the 39th annual Bernstein Conference on Strategic Solutions, said that a high level of risk is currently being recorded in the office sector.
He said that based on the analysis of the situation of the owners of real estate objects in different cities of the United States, it was concluded that the probability of loss-making lending to the real estate sector is the maximum. According to him, the current situation is explained by the fact that the financial and material condition of office owners has deteriorated against the background of an increase in the number of employees working remotely and an increase in borrowing costs.
Scharf said that the bank actively manages its loan portfolio and is working with borrowers on restructuring. He also said that there is currently an increase in credit card spending. Separately, the head of the financial institution noted that the credit quality of customers remains high.
Scharf said Wells Fargo plans to move 20% of its infrastructure to the cloud by the end of 2023.
In February of this year, experts warned of a high-level probability of the collapse of the American shopping center industry, which could lead to a wave of defaults on commercial real estate. They also stated that negative processes can affect office premises that have suffered from the point of view of financial efficiency as a result of the transition of many employees to remote work.
Experts at the beginning of this year assumed that against the background of an increase in the cost of borrowing, real estate prices would fall. This situation can provoke defaults in the commercial real estate sector, as companies reduce the leased space.
The results of special studies indicate that the intensity of the implementation of the trend of remote work is currently decreasing. In the United States, 13% of full-time workers work remotely. Also, 28% of employees of American companies and organizations work in a mixed format. This means that they sometimes visit offices and work from home.
As we have reported earlier, Wells Fargo Reaches $1 Billion Settlement With Shareholders.