Wells Fargo and Bank of America recorded higher write-offs on commercial real estate loans in the third quarter of 2026 as they dealt with troubled lending, reducing their outstanding problem balances while recognising more losses. The movements show why a decline in distressed loans is not, by itself, evidence of improving conditions for property borrowers: part of the reduction reflects banks removing debt they no longer expect to recover.

Wells Fargo’s commercial-property write-offs increased to $107M from $16M in the second quarter, while its problem commercial real estate loans declined 20% to $2.7B. Office and hotel lending accounted for the leading reductions in that problem balance. Bank of America’s write-offs rose to $105M from $2M over the same period, alongside a 17% fall in troubled commercial-property loans to $888M. Both banks therefore reported smaller pools of troubled property debt despite taking greater write-off losses during the quarter.

Those figures measure different aspects of the banks’ exposure. Write-offs record debt being removed, while problem-loan balances show the troubled lending that remains. When a bank writes off a loan, that debt also leaves its problem-loan total, linking the increase in recognised losses with the decline in outstanding distress. The quarterly movements should consequently be read together rather than as conflicting signals. A shrinking problem portfolio can reflect progress in resolving bad debt without establishing that borrowers’ capacity to repay has strengthened.

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At Wells Fargo, the $2.7B balance represents commercial real estate loans the bank doubts will be repaid in full. The reduction led by office and hotel loans identifies where its problem exposure contracted, but does not establish how much of that contraction came from improved borrower performance rather than losses or other resolutions. The higher write-offs are therefore an important qualification to the lower problem-loan figure. Taken together, the measures describe a bank reducing troubled exposure while recording higher quarterly write-offs on property lending.

Bank of America’s disclosures show that write-offs were not the only route out of troubled lending. Its earnings supplement reported that borrower paydowns accounted for more removals of nonperforming commercial loans in the third quarter than write-offs, and that some loans were also sold. That provides a broader picture of how the bank was resolving distressed credit. The scope matters, however: those disclosures cover commercial lending as a whole, not commercial real estate alone, so they cannot establish the precise sources of the property-loan decline.

The wider banking data also counsel caution about interpreting the two banks’ smaller problem portfolios as a broad recovery. According to the Federal Deposit Insurance Corp., 3. That industry measure predates the banks’ third-quarter results. It provides evidence of continuing stress among large lenders, rather than a directly comparable reading of their latest quarterly changes.

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Comparisons with JPMorgan Chase, the largest U.S. bank, are constrained by differences in disclosure. Its earnings supplement does not isolate problem commercial real estate loans, although its overall nonaccrual business lending declined slightly to $4.8B. That broader balance cannot be treated as a property-specific measure. JPMorgan chief financial officer Jeremy Barnum nevertheless identified commercial real estate among the areas facing pressure from higher interest rates and energy and fuel expenses, while characterising the bank’s overall credit outlook as relatively stable.

Interest-rate developments remain part of that backdrop. The Federal Reserve increased its benchmark rate in September 2026 to a range of 3.1% on Monday, October 19. Those developments sit alongside Barnum’s assessment of financing and operating-cost pressures. They also help explain why lower reported problem balances and caution about commercial property can coexist: resolving existing troubled loans does not, on its own, remove the pressures affecting the sector.

Bank of America offered a more reassuring assessment of its broader commercial credit position, while limiting expectations for further improvement. Borthwick said commercial losses were already sufficiently low that he did not anticipate much additional progress. “We feel good about 2027,” he said, adding that the bank did not currently see a change in underlying credit quality. His comments concerned commercial credit more broadly, rather than a separate forecast for commercial real estate, an important distinction when assessing the property write-offs.

The next test is whether troubled property balances continue to contract and what drives any further reduction. Write-offs, borrower repayments and loan sales have different implications for interpreting that progress. For now, Wells Fargo and Bank of America have reduced their reported problem commercial-property loans while recognising higher write-off losses. The figures demonstrate movement in resolving distressed debt, but broader credit assessments and the remaining problem balances leave a more qualified picture than the declines alone suggest.