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Construction loans, delinquencies at US banks grew QOQ in Q2 2023

Construction loans at US banks continued their multiyear growth in the second quarter, and total delinquencies rose for the third straight quarter.

Nonresidential construction loans increased 3.2% sequentially in the quarter to $386.07 billion, while residential construction loans fell 2.8% to $102.47 billion, according to S&P Global Market Intelligence data.

Total construction loans rose to 3.97% of gross loans and leases in the quarter from 3.93% in the first quarter.

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Delinquency trends diverge

While overall construction loan delinquencies rose 4.4% sequentially in the second quarter to $3.67 billion, delinquency trends diverged depending on the type of loan. For nonresidential construction loans, delinquencies rose 8% from the first quarter to $3.01 billion, while residential construction loan delinquencies fell about 9.5% to $666.9 million.

Delinquent loans made up 0.65% of total residential construction loans in the second quarter, down from 0.70% in the first quarter. Delinquencies were 0.78% of total nonresidential construction loans, up from 0.74% in the first quarter.

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Wells Fargo holds most construction loans

Wells Fargo & Co. had the largest dollar amount of construction loans on its books as of the second quarter, at $23.27 billion.

JPMorgan Chase & Co., which assumed substantially all of the deposits and purchased essentially all of the assets of First Republic Bank in May, had the second-most construction loans at $13.86 billion. A 228.5% jump in residential construction loans and a 21.9% increase in nonresidential construction loans pushed the company two spots up the list from a quarter earlier. Bank of America Corp. had the third-most construction loans at $11.82 billion.

Bank OZK had the largest proportion of construction loan values relative to its gross loans and leases, at 40%, followed by Pinnacle Financial Partners Inc. with 12.5%. The industry aggregate was 4%.

Other than JPMorgan Chase, RBC US Group Holdings LLC had the largest quarter-over-quarter increase in residential construction loans with a 22.6% pickup, followed by Fifth Third Bancorp with 14.6% quarter-over-quarter growth.

Bank of America had the largest quarter-over-quarter growth in nonresidential construction loans besides JPMorgan Chase, at 16%.

Santander Holdings USA Inc. had a 36.3% quarterly drop in residential construction loans, the largest among top-tier US banks.

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