Back to top

Image: Bigstock

Wells Fargo (WFC) to Divest Majority of CRE Loan Servicing Unit

Read MoreHide Full Article

Wells Fargo & Company (WFC - Free Report) has announced a definitive agreement to divest its non-Agency third-party servicing segment of its Commercial Mortgage Servicing (CMS) business to Trimont. The transaction is expected to close in early 2025, subject to customary closing conditions. 

Wells Fargo will continue to service Agency/government-sponsored enterprise loans and loans on its balance sheet. 

The deal makes Trimont the largest service provider of loans in the United States, giving it nearly 11% of the commercial real estate lending market. Upon closing, Trimont will manage more than $715 billion in U.S. and international commercial real estate loans.

Funding for the acquisition of WFC’s CMS business will come from Varde Partners, an alternative investment firm, which has acquired and owned Trimont through certain funds since 2015.

Kara McShane, executive vice president and head of Wells Fargo Commercial Real Estate, said, “This transaction is consistent with Wells Fargo’s strategy of focusing on businesses that are core to our consumer and corporate clients.” She further added, “We remain committed to our market-leading Commercial Real Estate business, and we will continue to serve our clients with a broad suite of lending, advisory and capital markets capabilities while leveraging our franchise to grow our Corporate and Investment Bank.”

At present, high interest rates and a lack of demand for offices are worrisome. The U.S. office vacancy rates are at a record high, and these are causing financial hardship for the banks. Hence, banks have been cutting back exposure to commercial real estate (CRE) loans and even eyeing loan sales to ease pressure on their loan portfolios.

Similar to Wells Fargo, this month, Deutsche Bank (DB - Free Report) announced its plan to offload almost $1 billion of its U.S. commercial property loans to trim down CRE loan exposure, per a Bloomberg report. The rising interest rates have weighed on profits in DB’s real estate portfolio.

In May, Canadian Imperial Bank of Commerce (CM - Free Report) signed agreements with multiple buyers to divest U.S.-based office loans worth $316 million at a discount. CM’s provisions also surged in its second quarter due to its exposure to CRE. 

Over the past six months, shares of WFC have gained 5.2% compared with the industry’s growth of 15.4%.
 

Zacks Investment Research
Image Source: Zacks Investment Research

Wells Fargo currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


See More Zacks Research for These Tickers


Pick one free report - opportunity may be withdrawn at any time


Wells Fargo & Company (WFC) - free report >>

Deutsche Bank Aktiengesellschaft (DB) - free report >>

Canadian Imperial Bank of Commerce (CM) - free report >>

Published in