Bank of America to pay US$2.9 billion for portfolio of WaFd multifamily loans

BANK of America agreed to buy a portfolio of commercial real estate loans from WaFd for about US$2.9 billion, helping the regional lender reduce its exposure to a sector that has raised red flags for regulators and investors.

The roughly 2,000 multifamily loans have an unpaid principal balance of US$3.2 billion, WaFd said in a regulatory filing on Friday (May 17). After the transaction is completed, slated for June 21, Bank of America is planning a structured transaction or loan sale with one or more Pacific Investment Management Co funds, WaFd said.

The Federal Reserve, Federal Deposit Insurance and Office of the Comptroller of the Currency indicated last year that they would focus more scrutiny on banks whose portfolios of commercial real estate loans are more than triple their capital. Examiners also planned to put special emphasis on portfolios that had grown at least 50 per cent in the past three years. WaFd had crossed both thresholds as of Sept 30. 

Shares of many regional banks declined in recent months as investors grew wary of commercial-property exposures, partly because of the prospect that regulators might press some lenders to bolster reserves or curb dividends. WaFd slumped 9.6 per cent this year through Thursday.  BLOOMBERG