Wells, BofA Top Holders of Real Estate Loans

Wells Fargo is by far the largest holder of commercial real estate loans among bank holding companies.

The San Francisco company has $132.7 billion of real estate loans on its books - well ahead of runner-up Bank of America, with $105.3 billion. Rounding out the Top 5 are J.P. Morgan ($63.4 billion), BB&T ($40.4 billion) and PNC ($35.5 billion).

The figures are based on a review of regulatory data by Foresight Analytics, a research firm in Oakland. Foresight found that the 1,000 largest banking companies held $1.46 trillion of commercial real estate loans on Sept. 30, according to the latest bank filings. That's equal to 9.7% of their $15 trillion of total assets (see tables on Pages 23-27).

Banks divide their commercial real estate loans into three categories: commercial mortgages, multi-family mortgages and construction/land loans. Commercial mortgages make up the lion's share - 60.3% of the total, or $879.2 billion. Construction and land loans are the next-biggest category, at 27.8%, or $405.5 billion. Multi-family loans are the smallest slice, at 11.8%, or $172.2 billion.

In the commercial mortgage category, Wells also leads the way, with $87 billion, followed by BofA ($54.6 billion), MetLife ($26.5 billion), J.P. Morgan ($22.7 billion) and BB&T ($22.5 billion).

BofA ranks first in construction/land loans, at $39.3 billion. Next come Wells ($36.4 billion), BB&T ($16 billion), PNC ($10.8 billion) and Regions Financial ($9.9 billion).

J.P. Morgan has the most multi-family loans, at $32.2 billion, followed by New York Community Bancorp ($16.5 billion), BofA ($11.4 billion), Wells ($9.3 billion) and Citigroup ($7.6 billion).

In normal times, the rankings would carry bragging rights as a measure of the real estate prowess of individual banks. But these days, large real estate portfolios can be a source of concern because of the sector's weakness.

Last year, only 20% of maturing bank commercial real estate loans were under water, according to Foresight. But the research firm projects that the percentages will soar to 43% this year, 60% in 2011 and 77% in 2012.

"It's possible we were lulled into a false sense of security in 2009 because banks did not report huge losses," said Matthew Anderson, a Foresight partner. "But I think that maturing mortgages are going to be very problematic for the mortgage market moving forward."

The outlook is especially dire for the construction/land loan category, which is suffering disproportionately heavy losses. Among the Top 1,000 holding companies, 15.7% of construction and land loans are nonperforming, versus 4% of commercial mortgages and 3.7% of multi-family mortgages, according to Foresight. And many analysts have said that banks haven't yet recognized the extent of losses in their portfolios.

Another potential sign of worry is disproportionately large real estate portfolios. While 9.7% of banking assets are in commercial real estate on average, some banks have much higher ratios. Forty-six of the 100 companies with the largest real estate portfolios have at least 30% of their assets invested in real estate, 30 have at least 40% and 13 have at least 50%.

Relatively big banks with disproportionately large proportions of commercial real estate loans include New York Community Bancorp (66.9%), Zions Bancorporation (43.6%), Marshall & Ilsley (31.3%), M&T Bank (30.2%), BB&T (24.4%) and Regions (24.3%).

On the flip side, some of the nation's biggest banks have below-average portfolios. Commercial real estate assets make up just 4.7% of total assets at BofA, the nation's biggest bank, 3.1% at No. 2 J.P. Morgan and 1.2% at No. 3 Citigroup. Of course, the sheer sizes of their asset bases still enable those companies to rank among the largest real estate holders.

Overall, the banking industry holds 44.6% of outstanding commercial real estate debt, according to data compiled by the Federal Reserve Board. Using government and private-sector data, the Fed tracked $3.4 trillion of outstanding commercial and multi-family assets as of Sept. 30, consisting of $2.6 trillion of loans and $871 billion of securities. Banks were the largest category, with $1.53 trillion of holdings. Other large categories included private CMBS trusts ($708.5 billion, or 20.6%), insurers ($310.1 billion, or 9%), agency loans ($282.6 billion, or 8.2%), agency securities ($162.2 billion) and savings institutions ($162.2 billion, or 4.7%).

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