Wells Fargo profit falls as bank boosts loan loss reserves; shares rise
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Wells Fargo on Friday reported lower quarterly earnings than a year ago as a decision to build up reserves cut into profits.
Wells Fargo shares were up 2% in premarket trading, as revenue topped expectations.
Here's what the bank did:
The bank set aside $784 million in provision for credit losses after reducing it by $1.4 billion a year ago. The provision included a $385 million increase in the allowance for credit losses reflecting loan growth and a less favorable economic environment, the bank said.
«Our solid business performance in the third quarter was significantly impacted by $(2.0) billion, or $(0.45) per share, in operating losses related to litigation, customer remediation, and regulatory matters primarily related to a variety of historical matters,» Chief Executive Charlie Scharf said in a statement.
Wells is operating under a series of consent orders tied to its 2016 fake accounts scandal, including one from the Fed that caps its asset growth.
As the most mortgage-dependent of the six biggest U.S. banks, Wells Fargo has faced pressure as sales and refinancing activity has fallen steeply amid mortgage rates that have topped 6%.
It's one of the impacts of the Federal Reserve's campaign to fight inflation by aggressively raising rates. Wells Fargo, with its focus on retail and commercial banking, was widely expected to be one of the big beneficiaries of higher rates.
Net interest income increased 36%, primarily due to the impact of higher interest rates and higher loan balances, the bank said.
«Wells Fargo is positioned well as we will continue to benefit from higher rates and ongoing disciplined expense management,» Scharf said. «Both consumer and business customers remain in a strong financial
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