Commercial real estate loan performance at large U.S. banks is showing resilience even as inflation, geopolitical tensions and weakening consumer sentiment cloud the broader economic outlook.
After several years of aggressively working through troubled assets, particularly in the office sector, banks are entering 2026 on firmer footing, according to a CoStar analysis. First-quarter earnings reports from major lenders indicate that delinquency levels on CRE loans are largely stable and, in some cases, improving.
Institutions including Wells Fargo, PNC Financial Services Group and First Horizon reported relatively unchanged levels of delinquent commercial real estate loans compared to a year earlier. Meanwhile, Bank of America posted a notable improvement, with nonperforming CRE loans falling 44% year-over-year to $1.19 billion.
The results suggest that banks are not losing ground on credit quality, even as external pressures intensify. Inflation accelerated in March, driven in part by higher energy prices tied to escalating conflict in the Middle East, while consumer sentiment fell to its lowest level since mid-2025.
Yet bank executives struck a largely confident tone.
"Our credit quality is still really strong," said Wells Fargo CEO Charlie Scharf during the company's earnings call, pointing to continued stability across its loan portfolio.
Charge-offs tied to commercial real estate dropped sharply to $19 million in the first quarter, down from $158 million in the prior quarter.
PNC reported a 26% decline in nonperforming CRE loans, while First Horizon saw only a modest uptick.
At the same time, lending activity appears to be picking back up. After a prolonged pullback, banks have begun re-entering the CRE lending market, signaling renewed confidence in asset quality and borrower performance. First Horizon executives noted that pipelines are strengthening, with opportunities to stabilize and grow balances in the quarters ahead.
Bank of America's results stand out not only for improved loan performance but also for its approach to risk management. The financial institution reduced its loan loss reserves in the first quarter, releasing $72 million, a move that runs counter to expectations among many analysts who anticipate reserve builds amid ongoing uncertainty.
Executives defended the decision by pointing to disciplined underwriting and a higher-quality borrower base, suggesting that not all lenders are bracing for a deterioration in credit conditions.
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