Wells Fargo shares fall as quarterly revenue misses estimates, bank says credit losses to increase

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Wells Fargo posted first-quarter revenue that fell short of Wall Street estimates and said future credit losses are set to increase.

However, the bank's earnings last quarter topped estimates as loan losses in the prior three months were less than expected.

Wells Fargo shares lost 3% in premarket trading.

Here are the numbers:

The bank's first-quarter results were helped by a decrease of $1.1 billion in the first quarter in the allowances for credit losses.

However, Wells Fargo warned that the positive effect may be short-lived and more loan losses could be on the horizon as Federal Reserve hikes interest rates to fight inflation.

«While we will likely see an increase in credit losses from historical lows, we should be a net beneficiary as we will benefit from rising rates, we have a strong capital position, and our lower expense base creates greater margins from which to invest.» CEO Charlie Scharf said in a statement.

Unlike big bank peers with its sizeable Wall Street divisions, Wells Fargo is more focused on U.S. retail and commercial banking customers. That means Wells Fargo is less impacted by volatile markets and sanctions against Russia due to the war in Ukraine.

Wall Street analysts expect Wells Fargo to be among the biggest beneficiaries of rising interest rates and a rebound in loan growth, forces that should boost the interest income it collects. Fed data show banks' loans grew 8% in the first quarter, driven by commercial borrowers.

«Our internal indicators continue to point towards the strength of our customers' financial position, but the Federal Reserve has made it clear that it will take actions necessary to reduce inflation and this will certainly reduce economic growth. In addition, the