October 14 (Businesshala) – Wells Fargo & Company (WFC.N) beat quarterly estimates for profit on Thursday, as the bank set aside funds to cover potential loan losses due to the pandemic and its years-old Reinforced sales costs. dealing scams.
The fourth-largest US bank has been in regulators’ penalty box since 2016 as it reforms governance and oversight, with the Federal Reserve capping its assets at $1.95 trillion.
The lender, which has paid out more than $5 billion in civil and criminal penalties, reported a $250 million hit for the third quarter after a top US banking regulator slashed its earlier efforts to pay back those customers. fined for the deficiencies in which he had earlier inflicted damages.
Overall, non-interest spending fell to $13.3 billion from $15.23 billion a year ago.
The bank said non-personnel spending fell $2 billion, or 30%, largely driven by lower restructuring fees and operating losses and lower COVID-19-related costs.
Wells Fargo shares rose 1.3% in pre-market trading.
Bank executives have indicated repeatedly that the worst of the scandal was behind them, and CEO Charlie Scharf has laid the groundwork for his turnaround plan, which aims to save $10 billion annually over the long term.
However issues remain. A federal judge earlier this month rejected the bank’s bid to dismiss a lawsuit that claimed it deceived shareholders about its ability to rebound from scandals.
“The recent OCC (Office of the Comptroller of the Currency) enforcement actions are a reminder that the critical loopholes that exist should remain our top priority upon my arrival,” Scharf said.
“I believe we are making significant progress, and I am confident in our ability to close the remaining gap over the next several years, although we may continue to have setbacks along the way,” Scharf said.
Fed Chair Jerome Powell said last month that the bank’s asset cap will remain in place until the firm has comprehensively fixed its problems, suggesting that Wells Fargo has There was a way to go.
The cap reduces the loan and deposit growth required by the bank to boost interest income and cover costs.
Wells Fargo’s average debt fell 8% to $854 billion, slipping for the fifth consecutive quarter. Soft loan demand, combined with lower interest rates, also hurt its net interest income, falling 5%.
Average lending in consumer banking fell 14% in the quarter, while commercial lending fell 12%.
Wells Fargo has fewer ways to offset the drop in revenue from lower interest rates because the bank doesn’t have a large capital markets business like rivals.
The lender reported a $1.7 billion reduction in credit deficit allowance in the quarter. Rival Bank of America Corp (BAC.N) also trounced third-quarter profit estimates on Thursday, as it issued reserves of $1.1 billion.
For the quarter ended Sept. 30, a decline in provisions boosted Wells Fargo’s net income to $5.12 billion, or $1.17 per share, from $3.22 billion, or 70 cents per share, a year earlier.
According to Refinitiv estimates, Wells Fargo earned $1.22 per share excluding items, compared to a consensus estimate of 99 cents per share.
Total revenue fell 2% to $18.8 billion.