Wells Fargo profit shrinks more than 7% on lower interest income

(Reuters) -Wells Fargo's profit fell more than 7% as it earned less from customer interest payments in the first quarter, sending its shares down 3% in premarket trading.

Net income declined to $4.62 billion, or $1.20 per share, for the three months ended March 31, the lender reported on Friday. That compared with $4.99 billion, or $1.23 per share, a year earlier.

Wells Fargo's net interest income (NII) -- the difference between what it earns on loans and pays out for deposits -- fell 8% to $12.23 billion.

The bank also paid $284 million into a Federal Deposit Insurance Corp fund that was drained last year after three regional lenders failed.

The shifting U.S. interest rate outlook is an important factor that will drive banks' future profits. U.S. consumer prices increased more than expected in March, leading financial markets to anticipate that the Federal Reserve would delay cutting rates until September.

Higher-for-longer rates could boost lenders' earnings as they bring in more money from interest payments.

But the interest rate increases have also made it more costly for banks, prompting them to pay more to keep deposits from customers who are seeking higher yields for their money. Tighter monetary policy could also crimp borrower demand and dampen economic activity, including Wall Street dealmaking.

Wells Fargo said in January its NII could fall 7% to 9% this year.

The bank is operating under a $1.95 trillion asset cap that prevents it from growing until regulators deem it has fixed problems from a fake accounts scandal.

The lender still has eight open consent orders after the U.S. Office of the Comptroller of the Currency (OCC) terminated a 2016 punishment in February.

"We reached an important milestone in the first quarter when the OCC announced the termination of a consent order it issued in 2016 regarding sales practices misconduct," CEO Charlie Scharf said in a statement.

"The remaining risk and control work continues to be our top priority and we will not be satisfied until all work is complete," he added.

Scharf became CEO in 2019, the fourth person to lead Wells Fargo since the scandal first emerged. He has worked to turn the lender around, cutting costs and exiting businesses after it racked up billions in lawsuits and regulatory fines.

(Reporting by Noor Zainab Hussain and Manya Saini in Bengaluru and Saeed Azhar in New York; Editing by Lananh Nguyen and Sriraj Kalluvila)

Published Date: 4:01 AM April 12, 2024
Updated Date: 4:06 AM April 12, 2024
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11 replies (most recent on top)

DJT will become a penny stock by YE. There is no cash flow, no unique product , Twitter has 368 million active users, truth social about 1 million. If twitter hasn’t been able to turn profit, just imagine the mo--ns own and run DJT. Those bought DJT stocks are duped.

@wug+1s03hiPD

Every penny of profit that WE generate, Hudson Yards spends on pointless pet projects, to hire their friends, and to buy back stock to keep their shares going up. They are literally flushing our businesses future down the toilet for their own personal gain. $4B in profit...$6B spent on company stock.

who cares abt WF? It is very important that charlie is rich and famous.

So you would rather invest in a company that lost $58 mill than invest in a company that had a net income of a most $20 Billion in 2023. Stick to your day job!

I’d invest in Truth Social before I’d ever invest in Wells Fargo (and I’m a Democrat🥴).

One of the important metrics for investors is the efficiency ratio. WF has been underperforming based on their peers, hence this is driving the cost reduction efforts. Did anyone attend the earnings call, and was this discussed?

Inefficiency? Impossible. I invest half my time justifying my own existence in a never ending series of corporate initiatives that have nothing to do with productive work. A good chunk of the other half goes to DEI and similar box checking time wasters foisted upon us by people who's own hiring history suggests very strong bias and favoritism. How could inefficiencies ever happen here?

Can't think of a good reason to invest in WFC. Is the stock up a little recently? Sure, but it's been flat since 2015 in spite of massive buybacks and inflation. The executives have no plans other than firing people and that can only go on so long. Earning $4.XB and turning around and spending $6B on company stock is the kind of madness that only makes sense if you personally own millions of shares and don't care at all about thr future of the company.

Compared to last year 1st quarter, the results are actually slightly better. They took another special assessment of around 300 mill or 6 cents to give back to the FED for other banks failures. Their EPS for this quarter would have been $1.26 per share which is better then last year 1st quarter of $1.23 per share.

If you don't grow, you die

You know what would fix this? More layoffs.

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Wells Fargo profit shrinks more than 7% on lower interest income

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