Wells Fargo loses steam in commercial lending as rivals pounce

From Reuters - April 17, 2018

NEW YORK (Reuters) - Wells Fargo & Cos two biggest competitors have been nabbing market share in lending to commercial and industrial customers in the American heartland, a sign of how difficult it has become for the scandal-tarnished bank to defend its position against rivals.

Earnings reports in recent days showed Wells Fargos book of C&I loans in the United States down 1 percent, on average, during the first quarter compared with the year-earlier period. In contrast, JPMorgan Chase & Cos gained 5 percent and Bank of America Corps was 4 percent higher.

Although the banks define C&I loans somewhat differently, their reports track government data showing Wells falling behind over the past five years from a near-tie with Bank of America and losing ground to JPMorgan. (GRAPHIC:

Those two banks attributed gains to opening offices and adding bankers in smaller cities around the country, a strategy Wells Fargo has embraced for decades. But as Wells struggles to recover from a sales scandal that has touched customers in businesses ranges from deposits, credit cards, mortgages and auto lending to wealth management, it has become harder for the bank to maintain its competitive edge.

Chief Financial Officer John Shrewsberry said as much on Friday when an analyst asked whether Wells Fargo is losing any customers because of negative headlines.

We have to compete a little bit harder, he said, noting that rivals have been trying harder to steal business during Wells Fargos time of vulnerability.

Asked by Reuters about the decline in C&I lending specifically, Shrewsberry said that while Wells Fargo competes aggressively on pricing, it has been stricter about loan structures than other banks. For example, Wells might give a borrower a lower interest rate but would not offer a bigger loan or extend the duration or relax loan terms.

Since 2010, JPMorgan has opened 52 new commercial lending offices, including in San Francisco, where Wells is based, as well as in Silicon Valleys Palo Alto, Omaha, Nebraska, and Memphis, Tennessee. It has also hired as many as 100 commercial bankers each year, many of whom cater to companies with annual revenue of just $20 million to $500 million.

Using a similar strategy, Bank of America has hired some 400 commercial bankers in recent years.

Banks tend to forge long-lasting bonds with C&I borrowers that can lead to additional work, such as managing cash, handling payments, issuing corporate credit cards, raising money in capital markets and even advising on acquisitions. That makes Wells Fargos market share decline particularly troubling, said Keefe, Bruyette & Woods analyst Brian Kleinhanzl.


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