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Bank of America, Wells Fargo among US banks with high retail exposure

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According to Market Intelligence, December 2022

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Bank of America, Wells Fargo among US banks with high retail exposure

U.S. banks continued to disclose exposure to commercial retail borrowers as distress mounts in the space.

Among reporting banks, Bank of America Corp., Wells Fargo & Co. and U.S. Bancorp remain the three with the highest nominal value of loans in the segment as of the end of the second quarter, even after their respective lending totals in various retail categories mostly declined from the first quarter, according to filings.

Data firm Real Capital Analytics estimated in a second-quarter report that "potentially distressed assets" in retail totaled $29.4 billion for the first half of 2020. The inflow of distress during the quarter was more than twice the average quarterly inflow in 2009 in the crux of the global financial crisis, the firm said.

Wells Fargo reported $49.5 billion in loans in three commercial retail categories: commercial and industrial retail lease financing; retail commercial real estate, excluding shopping centers; and commercial real estate shopping centers. The nominal value of Wells Fargo's loans in the commercial and industrial retail lease financing segment declined 16.9% in the second quarter, but, at $23.1 billion, was still the second-highest figure in any category identified by reporting banks at the end of the second quarter. Altogether, Wells Fargo's loans to commercial retail borrowers comprised 5.1% of its gross lending activity.

Bank of America disclosed $35.9 billion in loans across two lending categories — retailing, and food and staples retailing — according to S&P Global Market Intelligence data. The bank's $29.6 billion in loans to retailing borrowers declined 11.8% by nominal value during the second quarter, and its $6.4 billion loans to food and staples retailing borrowers fell 6.1%. Together, the loans comprised 3.6% of the bank's gross lending activity at the end of period.

U.S. Bancorp reported $14.3 billion in loans in its retail category, which includes restaurants. The figure represents a 0.3% decline from the first quarter and 4.5% of the company's gross lending activity at the end of the second quarter.

Amerant Bancorp Inc. and Hope Bancorp Inc. reported high proportional exposure to commercial retail borrowers as of the end of the quarter. Amerant's $1.1 billion balance to retail commercial real estate borrowers represented 19.2% of its gross lending activity, and Hope Bancorp's $2.3 billion in loans in its retail buildings category represented 17.7% of its gross loans.

Cathay General Bancorp, Pinnacle Financial Partners Inc. and Sandy Spring Bancorp Inc. also had relatively high proportional exposure to commercial retail borrowers at 11.2%, 10.4% and 10.2%, respectively.

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Click here to see the retail exposure data in Excel.