Wells Fargo Cuts CRE Exposure Amid Apartment Loan Surge

Wells Fargo trims bad CRE loans but sees a sharp rise in troubled apartment debt as market stress and uncertainty shift.

July 17, 2025

Jordan B.

Wells Fargo cut its nonaccrual commercial real estate loans to $3.6B in Q2, down from $3.8B in Q1.
Office loans drove the decline, but nonperforming apartment loans jumped to $378M from just $28M a year ago.
The bank’s total CRE loan book shrank 1.1%, with no rush to replace risky loans.
Despite strong earnings, Wells Fargo stock dropped after it lowered its 2025 income forecast.

Key Takeaways

Office Loan Risk Is Shrinking

Wells Fargo is slowly cutting its exposure to bad office debt, per Bisnow. In Q2, nonaccrual CRE loans dropped by $200M. Office loans led the improvement, helping reduce total nonperforming assets by 3%.

Over the last year, Wells Fargo removed $765M in nonaccrual CRE loans. CFO Mike Santomassimo said office values are stabilizing, but more losses are expected. “It will take time for the office fundamentals to recover,” he said.

Apartment Loans Are Under Pressure

While office loans are improving, apartment loans are heading the other way. Nonaccrual apartment loans soared to $378M in Q2, up from $28M a year ago.

Wells Fargo holds $39B in total apartment loans. The rising number of troubled loans shows stress in the multifamily market. This may be due to higher costs, lower rent growth, and tighter refinancing terms.

Banks Get More Cautious

Other big banks are also being careful. JPMorgan Chase said its CRE banking revenue fell 1% in Q2. It did not break out office loan data but said its total CRE portfolio grew slightly.

Wells Fargo’s total CRE loan book shrank by 1.1% year-over-year. The bank is lending more to businesses for inventory and equipment, but it isn’t eager to fund office or construction projects.

Why It Matters

Lenders are more cautious as property values and rent growth slow. Developers are struggling to get financing. Some need to bring more equity to the table to secure loans.

Experts say tighter credit, tariffs, and rate uncertainty are making deals harder to close. Banks are focusing on safer loans as commercial real estate continues to face headwinds.

What’s Next

Wells Fargo earned $5.5B in Q2, beating forecasts. It repurchased $6B in stock and plans to raise its dividend. But it also lowered its full-year income outlook, leading to a 5% drop in its stock price.

The bank expects more loan losses, especially in office and apartments. But leaders say these should stay within forecasted ranges. As loan quality improves, banks are still cautious. Credit standards are tighter, and loan growth in risky areas remains slow.

CRE borrowers and lenders alike should prepare for a slow and selective recovery.