U.S. banks increase reserves due to commercial real estate impact.

20 July (Reuters) - The U.S. commercial real estate market is facing serious post-pandemic challenges due to slow office occupancy, reduced retail activity and higher interest rates. The strain has led banks and other lenders to narrow their requirements for new loans and scrutinize existing ones.

The sector highlights:

BANK OF AMERICA CORP (BAC.N):

Finance Director Alastair Borthwick said the bank had losses of $17 million on office loans in the second quarter, compared with $15 million in the first quarter. Total assets under review for credit risk increased by $1.7 billion on''compared to the first quarter, mainly due to IP-related assets. However, Borthwick noted that office-related QNs' share of the bank's loan portfolio is small at 2%.

GOLDMAN SACHS GROUP INC (GS.N):

The investment bank reported about $305 million in net losses in its private portfolio due to the decline in the value of its office BOE. The Wall Street giant also said its debt investment income was down $197 million from a year ago, largely due to "weak performance" in its real estate investments.

Goldman Sachs Group Chief Financial Officer Dennis Coleman said provisions for potential credit losses totaled $615 million in the second quarter. Loans related to QNs accounted for just 15%''of the bank's total loan portfolio, with office-based QNs accounting for only 1% of the QN-related loan portfolio.

JPMORGAN CHASE & CO (JPM.N):

While CH revenues rose to $806 million in the second quarter from $642 million in the first, JPMorgan reported a $1.1 billion provision due to its office portfolio.

WELLS FARGO (WFC.N):

The bank said asset write-offs increased by $949 million, mostly on office loans. At the same time, second-quarter BOE income rose due to higher interest rates and''volume of loans.

Wells Fargo CEO Charlie Scharf said, "While we have not seen significant losses in our office portfolio to date, we are making reservations that anticipated problems will manifest themselves.

CITIZENS FINANCIAL SERVICES (CZFS.O):

Nonperforming Citizens loans, i.e., loans for which payment has not been made within 90 days, increased $195 million to approximately $1.2 billion, and losses on net charge-offs increased $19 million to $152 million. Both of these increases were primarily driven by the bank's share of office space in its portfolio of loans related to QNs.

Citizens recorded $176 million in credit losses in the second quarter. The bank increased the provision for credit losses to 2.04''billion dollars from $2.01 billion at the end of the first quarter, of which $41 million related to the general office portfolio.

The CEO of Citizen told investors, "We believe the losses are controllable and can be repaid from reserves. "

EAST WEST BANCORP (EWBC.O):

The bank noted that the average borrower ratio in its BOE portfolio is 61%, a key metric used to determine the credit risk of a loan. East West's office portfolio has an average ratio of 52%.