Wells Fargo's public reputation has been battered and bruised in recent years, and it has hit the bank's bottom line in every area of its business — including commercial real estate lending.
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On Friday, Wells Fargo Chief Financial Officer John Shrewsberry announced that he expected the bank's consumer and commercial real estate loan exposure to decrease from the first to the second quarter, the Wall Street Journal reports. Commercial and industrial business loans are expected to rise, but at slower rates than previous quarters.
Overall, Wells Fargo's outstanding loans fell $3B between the first and second quarter, representing the bank's fifth straight quarter of flat or declining loans, according to the WSJ. The bank still has well over $900B in total outstanding loans, but has lost ground to main competitors JPMorgan Chase and Citigroup.
Shrewsberry chalked up the declining performance to increased competition from nonbank lending sources that behave more aggressively and provide riskier terms than banks either are allowed or feel comfortable providing. He also acknowledged that the bank's long list of damaging news reports about bad behavior has also had an effect — marking one of the first times Wells Fargo has admitted a connection between its public reputation and its struggling lending business.
The investment bank has paid billions of dollars in settlements since the 2016 revelation that its officers had secretly signed up individuals for multiple accounts to hit sales goals. It also has been investigated for illegal practices across multiple facets of its business, including wealth management, home lending and affordable housing financing. Wells Fargo has joined other banks in shuttering large numbers of its physical branches as a cost-saving measure, and experienced an 11% dip in profits in the second quarter.
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