Wells Fargo is having a tough time growing its loan book. The drumbeat of negative news around its governance issues is one reason for its struggles, and shooting the messenger won’t help.
Chief Financial Officer John Shrewsberry said at a conference on Friday that he expects two key classes of business loans, commercial real estate and commercial and industrial loans, to fall from second-quarter levels, although he didn’t specify an exact time frame. Wells Fargo’s WFC, -0.49% total loans outstanding at the end of the second quarter were down by $3 billion compared with the prior quarter, driven by declines in consumer and commercial real-estate loans. Commercial and industrial loans rose.
Several midsize regional lenders also warned of soft lending this week, which hit their share prices. But most merely cited a slowdown, not an outright decline. Wells Fargo’s big bank peers C, +0.56% and JPMorgan Chase JPM, -0.02% actually gave upbeat lending outlooks.
Mr. Shrewsberry cited a host of factors, including deliberate lending discipline, strong capital markets that provide an alternative funding source and a competitive environment, including from nonbank lenders. But he also acknowledged for the first time that reputational issues may be hurting its commercial-lending business, not just the consumer business where the impact has long been obvious.
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