Wells Fargo's Corporate Loans Cause Stir

Updated from 3:06 p.m. EST

Wells Fargo (WFC) investors and analysts tend to look most closely at the bank's residential real estate loans, but its commercial loan portfolio is nearly as large, and could face trouble as the economy worsens.

Because Wells Fargo had no investment bank prior to its acquisition of Wachovia, which closed Dec. 31, it is generally viewed as having been much more responsible in terms of commercial lending than other large banks that do, like JPMorgan Chase (JPM), Citigroup (C) and Bank of America (BAC).

While Wachovia had an investment bank, it wasn't a top underwriter on big syndicated leveraged loans. Wachovia had just under $3 billion in exposure to leveraged loans at the end of the third quarter, according to a company regulatory filing.

Still, Wachovia adds $218.9 billion to the $171.3 billion of commercial loans on Wells Fargo's balance sheet at the end of the third quarter. As the economy worsens, these loans will inevitably come under pressure.

The issue could garner some attention in the bank's fourth-quarter earnings report Wednesday morning.

A Wells Fargo spokeswoman declined to make anyone available to discuss the loan portfolio. Vicki Wagner-Aloia, debt analyst with Standard & Poor's, says Wells Fargo avoids "large single exposures," but she couldn't offer a clear picture of the typical size of the bank's corporate loans.

"There's not an average that would be meaningful," she says. "It's by loan type, and it's not something they disclose publicly."

While Wagner-Aloia believes Wells Fargo's disclosures are sufficient to give her a grasp of the health of the corporate loan portfolio, the bank might pick up additional investors if it disclosed more.