Floating Loans Revenue Dips at Major Banks

Floating Loan Revenue Slips

According to CoStar, Wells Fargo and Bank of America are seeing the impact of recent interest rate cuts, with both reporting less revenue from floating loans tied to commercial properties. Both banks highlighted the negative effect of lower interest rates on net interest income during their latest earnings calls.

Lower Yields, Higher Demand

The Federal Reserve cut rates three times in late 2025, and loan yields dropped accordingly. Wells Fargo’s average loan yield fell to 5.78%, down 38 basis points, while Bank of America’s yield on commercial real estate loans dropped 76 basis points to 5.93%. Yet, both banks saw continued strong demand for floating loans in multifamily, industrial, and data center real estate sectors.

Loan Growth Outpaces Revenue Decline

Despite shrinking revenue from floating loans, both institutions reported increased loan books. Bank of America’s commercial real estate loan volume grew 4.6% to $68.7B, while Wells Fargo reported broad-based loan book growth and consistent demand, particularly in desirable office markets. This comes even as Wells Fargo continues to reduce broader CRE exposure, shifting focus toward segments like multifamily where borrower interest remains strong.

Market Segmentation Remains Key

Executives noted a divide in office market demand: prime office buildings in strong cities continue to attract borrowers, while older inventory has stabilized. Bank leaders expect loan growth to persist into 2026, although older office stock draws less interest. More insights are expected as additional banks report earnings.