JPMorgan Chase & Co is expanding its U.S. commercial banking business, even amid the recession, and is considering a return to commercial real estate next year.

As other banks have labored to lay off commercial real estate exposure -- the cause of the most recent slew of loan losses for many financial institutions -- JPMorgan's Texan head of commercial banking, Todd Maclin, believes there may be an opportunity in this business next year.

These assets are rapidly re-pricing, there are a number of distressed sellers, there are a number of financial institutions that are overexposed, and from our past experience those sorts of things generally translate into an opportunity as you approach the bottom, he told Reuters.

JPMorgan has benefited from its limited exposure to commercial real estate relative to peers -- in the second quarter, it accounted for just $12.3 billion of JPMorgan's total $109 billion in commercial banking loans -- and under Chief Executive Jamie Dimon, the bank is known as a cautious risk taker and one of the best survivors of the financial crisis.

I wouldn't say we've put our toes in the water but maybe we've taken our shoes and socks off, said Maclin, talking on the phone from Long Island where he was visiting clients.


The commercial banking division, which provides lending, treasury and other bank services to clients including corporations, not-for-profit entities and municipalities, has already expanded this year, largely by taking market share from rivals and making the most of its nearly year-old Washington Mutual acquisition.

Under 53-year-old Maclin, the unit lent $15 billion to small- and mid-sized companies in the second quarter -- a more than 50 percent increase on the first quarter -- even as other lenders such as CIT Group struggled to lend money while battling rising loan losses.

There's been a lot of flight-to-quality; people are definitely moving business to our firm, said Maclin.

JPMorgan's acquisition of Seattle-based thrift Washington Mutual's bank assets last September brought the second-largest U.S. bank an established branch network on the west coast and this is another way that Maclin's division is looking to expand.

Maclin transferred eight bankers from Chase to former Washington Mutual markets -- predominantly Florida, Georgia, California, Washington and Oregon -- and the bank also hired 40 local bankers and associates to build up middle-market and commercial banking business.

There's definitely a full-fledged recession going on in (some of) those markets, but we find there are a number of companies that are concerned about their banks and looking for an alternative, Maclin said.

Commercial loan losses have been rising -- the unit reported net charge-offs of $181 million in the second quarter, up from $49 million in the same period a year earlier -- but what Dimon likes to refer to as a fortress balance sheet has put the bank on more solid ground than rivals.

In particular, JPMorgan's commercial bank, in partnership with its investment bank, has recently scooped up various deals providing financing to hospitals, colleges and local governments.

By keeping our nose clean, we're open for business right now at a time when frankly a lot of our competitors are distracted, said Maclin. If you keep your wits about you during the boom periods then it really pays off in the downturn.

(Reporting by Elinor Comlay; Editing by Richard Chang)