Wells Fargo Reportedly Working with Borrowers as Office Sector Struggles

Wells Fargo reportedly expects to see losses from real estate loans.

CEO Charlie Scharf said Wednesday (May 31) at an event that there are significant risks in the office sector, Bloomberg reported Wednesday.

“We look city by city, we look property by property to look at our exposures, and I would say there’s no question that there will be losses,” Scharf said at the Bernstein 39th Annual Strategic Decisions Conference, according to the report.

The report attributed office owners’ struggles to increases in both remote work and borrowing costs.

Scharf said that Wells Fargo is proactively managing its loan portfolio, is working with borrowers to restructure terms and is not “overly concentrated” in office, the report said.

The CEO also said during the event that credit card spending is rising, that the credit quality of the bank’s customers remains strong, and that Wells Fargo expects to migrate 20% of its infrastructure to the cloud by the end of the year, per the report.

It was reported in February that the collapse of the American mall industry could be near and could portend a wave of commercial real estate defaults that extends to office spaces hit by the work-from-home phenomenon.

As borrowing costs rise, property values will fall, leading to a wave of defaults throughout the commercial real estate industry that could extend to office buildings as companies reduce the amount of space they lease, Bloomberg reported Feb. 17.

This report comes as business leaders are looking to answer the question of hybrid, remote or full-time in-office employment policies.

Employer plans for work from home are trending down, but 13% of full-time workers are fully remote and 28% are in a hybrid arrangement.

PYMNTS research has found that high-income consumers are still working from home, while low-income consumers are increasingly returning to jobs requiring them to work on-site.

High-income consumers—defined as those making $100,000 or more annually — are 78% more likely than low-income consumers to have jobs they can perform at home, according to “Digitally Divided: Work, Health and the Income Gap,” the February edition of “The ConnectedEconomy™ Monthly Report.”

The report also found that 71% of high-income consumers — an estimated 45 million people — currently do at least some of their work from home.