Concerning signs are showing up in the commercial real estate businesses of the largest U.S. banks, even as inflation and high interest rates did little to hurt their financial performance in the third quarter.

Some major banks, including JPMorgan Chase and Wells Fargo, reported higher revenue and profit. The outlier Friday was PNC Financial Services Group, with its revenue falling 1%, but net income still rising 5%.

Even so, distress is trickling into the banks’ property portfolios — most prominently through office lending.

In response, the banks added again to the amount of money they set aside for commercial real estate loan losses in the future — with JPMorgan and PNC adding less than in the previous quarter. Wells Fargo, the largest U.S. bank lender for commercial properties, increased the amount of its provisions from the previous quarter.

New York-based JPMorgan raised its loan-loss reserves by $14 million in its commercial banking segment that handles commercial real estate lending. The uptick reflects updates to real estate pricing variables, the bank said, but it was down from a $389 million increase in the second quarter.

Pittsburgh-based PNC also reported a smaller rise in allowances for losses on all loans. The bank had a $153 million increase in provisions. In the previous quarter, it had upped that number by $189 million.

Meanwhile, San Francisco-based Wells Fargo reported increasing its provision for credit losses by $349 million in its corporate and investment banking segment that handles commercial real estate lending. That is up from the previous quarter when it reduced the same number by $609 million.

Weakness “in the commercial real estate office sector has begun to materialize,” Robert Reilly, chief financial officer of PNC, said on the company’s third-quarter earnings call. “Nonperforming loans increased $210 million, or 11%" over the previous quarter, he said, adding that the increase was driven by multitenant office buildings.

In regard to the portfolio, Reilly said, the volume of loans having a high risk of default didn’t change quarter over quarter, but some of them were moved to nonperforming status. That outcome was expected, Reilly said, as the bank has worked to resolve occupancy and interest rate challenges on its weakest loans in the sector.

“Ultimately, we expect future losses on this portfolio, and we believe we have reserved against those potential losses accordingly,” Reilly said. “As of Sept. 30, our reserves on the office portfolio were 8.5% of total office loans.”

PNC did not break out a similar number for reserves to office loans in the second quarter.

Wells Fargo delivered a similar message. Nonperforming assets were up $1.2 billion, or 17%, driven by more commercial real estate loans going unpaid, predominantly in its office portfolio, the bank said.

However, figuring out how much stress to expect and how much to set aside for potential losses is not clear, according to Wells Fargo.

“The hard part of office right now is that there aren't a lot of trades happening yet,” Mike Santomassimo, chief financial officer of Wells Fargo, said on the bank’s earnings call. “You still have somewhat limited information and price discovery in a lot of places.”

Bringing in a variety of different data, the bank has tried its best to identitfy what the range of loss could look like, Santomassimo said.

“We haven't really seen any losses of significance yet, but we will,” he said. “It just takes some time for it to play out for each of these underlying situations. Probably longer than any of us would have hoped.”

Wells Fargo reported however that its commercial real estate revenue was up 14%, reflecting the impact of high interest rates and increased revenue in its low-income housing business.

For JPMorgan Chase, net revenue in the third quarter went up 21% while net income rose 35%. In commercial banking alone, which covers commercial real estate lending, net revenue climbed 32%, and net profits grew 105%, the bank said.

JPMorgan’s provision for credit losses in commercial banking was $90 million, primarily reflecting net charge-offs of $53 million. The net reserve build of $37 million was driven by updates to certain commercial real estate pricing variables, the bank said.