Pedestrians pass a Wells Fargo bank branch in New York, U.S., on Thursday, Jan. 13, 2022.
Victor J. Blue | Bloomberg | Getty Images
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:
- Earnings: 85 cents per share, compared with $1.17 per share in Q3 2021
- Revenue: $19.51 billion, beating an estimate of $18.78 billion, according to Refinitiv
- Provision for credit losses: $784 million
“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.
“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 condition, and we continue to see historically low delinquencies and high payment rates across our portfolios.”
Concerns that the Fed would inadvertently tip the economy into recession have grown this year, weighing heavily on the shares of banks. That’s because more borrowers would default on loans, from credit cards to mortgages to commercial lines of credit, in a recession.
Read the full earnings release.
— CNBC’s Hugh Son contributed reporting.
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