Wells Fargo to Boost Auto Lending as Real Estate Sparks Concern

Wells Fargo & Co. Chief Executive Officer Tim Sloan said the firm is ready to increase lending for car sales after pulling back last year, and it’s now looking with consternation at the commercial real estate market.

In auto lending, “we’ve pulled back enough and now we’re going to be growing that business again,” Sloan said Monday in an interview with Erik Schatzker on Bloomberg Television. Yet, “there are some markets that we’re a little bit concerned about.”

Some transactions in commercial real estate seem “frothy,” he said, without giving examples. The San Francisco-based firm still likes that business, he noted.

Wells Fargo decided to rein in car financing in mid-2017 and tighten underwriting standards. The decision came as a drop in vehicle resale prices made it harder for lenders to blunt losses by repossessing cars when borrowers default.

The firm previously signaled it could resume growth in that business some time later this year. In February, Wells Fargo said it aimed to complete consolidation of its regional car-loan centers by April, and that lending would then increase within two quarters.

Exercising Discipline

Sales of investment properties in Manhattan, the nation’s largest commercial real estate market, got off to a faster start in 2018 than last year as buyers became more aggressive. There’s also been a surge in prices for a less sexy type of property — warehouses — as e-commerce companies race to build distribution centers across the U.S. to compete with industry leader Amazon.com Inc.

In an investor presentation this month, Wells Fargo Treasurer Neal Blinde said long periods of economic growth and good credit conditions give borrowers more options, putting pressure on banks to compete for financing deals. While some lenders take those risks, Wells Fargo prefers to maintain discipline in that part of the cycle, Blinde said.

Ten-year Treasury yields could rise in coming months after surpassing 3 percent recently, Sloan said. “Could I imagine us seeing a 10-year at 3 1/2 percent or 4 sometime in the next six to 12 months? Absolutely,” he said. A swift uptick in rates can damp the economy.

In the wide-ranging interview, Sloan also discussed the bank’s campaign to rebuild customer trust after a series of scandals. The company’s culture is “fundamentally fine,” he said, and its efforts now mostly focus on improving processes and internal systems. This month, Wells Fargo launched an ad campaign called “Re-Established,” reassuring the public that it’s addressing problems and making things right.

“It’s being honest about saying, ‘Look, we’ve made some mistakes, there’s no question about that,’” Sloan said. “We’ve taken responsibility. We’re not perfect, but we’re going to move forward.”

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