Wells Fargo Reports Lower Earnings Amid Decline in Net Interest Income

Wells Fargo & Co., one of the largest banking institutions in the United States, revealed lower earnings and revenue in its third-quarter report, released on Friday. The bank experienced a notable reduction in net interest income, a crucial measure of profitability in lending.

The San Francisco-based financial institution reported $11.69 billion in net interest income, marking an 11% decrease compared to the same period last year. This figure fell short of the $11.9 billion estimate by FactSet but was consistent with some analysts’ expectations. The bank attributed this decline to heightened funding costs as customers moved to higher yielding deposit products.

In a statement, Wells Fargo’s CEO, Charles Scharf, commented on the bank’s evolving business model, stating, “Our earnings profile is very different than it was five years ago as we have been making strategic investments in many of our businesses and de-emphasizing or selling others.” He further noted that fee-based revenue saw a 16% growth during the first nine months of the fiscal year, which helped counterbalance the challenges in net interest income.

The bank’s net income fell to $5.11 billion, or $1.42 per share, compared to $5.77 billion, or $1.48 per share, in the same quarter last year. Despite the overall dip, the earnings per share exceeded analysts’ predictions of $1.28. Wells Fargo’s revenue also decreased, reaching $20.37 billion from $20.86 billion in the previous year.

Furthermore, Wells Fargo reported an allocation of $1.07 billion for credit losses, which included a slight reduction in the allowance for such losses. The bank demonstrated a commitment to shareholders by repurchasing $3.5 billion worth of common stock in the third quarter, contributing to a nine-month total exceeding $15 billion—a 60% increase from the previous year.

Despite a 3% rise in premarket trading following the earnings announcement, Wells Fargo’s shares have gained 17% over the year. However, this growth has not matched the broader performance of indices like the S&P 500. The stock saw a slight decline of 0.8% in premarket trading, maintaining an overall position that lags behind the KBW Nasdaq Bank Index.