Wells Fargo Posts Weaker Earnings -- Update
Wells Fargo & Co. said third-quarter profit and revenue fell as the bank was hurt by a coming legal settlement and continues to struggle with the fallout from last year's sales-practice scandal.
Following the results, shares at one of the nation's largest banks fell 1.4% in premarket trading.
Wells Fargo reported a profit of $4.57 billion, or 84 cents a share, which included a charge of $1 billion, or 20 cents a share, for previously disclosed mortgage-related regulatory investigations. That compared with $5.64 billion, or $1.03 a share, in the year-ago period. Analysts polled by Thomson Reuters had expected earnings of $1.03 a share.
Revenue fell to $21.93 billion from $22.33 billion. Analysts had expected $22.40 billion.
Wells Fargo, led by Chief Executive Timothy Sloan, had been one of the more consistent big banks at growing earnings and revenue. Shares, though, dropped last year after the bank agreed to a $185 million settlement over opening accounts with fictitious or unauthorized information. It recently updated the number of potentially affected accounts to 3.5 million.
That is on top of consumer-lending problems around auto insurance charges and mortgage fees that regulators are probing. Mr. Sloan testified in a congressional hearing last week on those matters.
Wells Fargo also continues to face a spate of state and federal investigations that the bank has said it is cooperating with.
Investors have so far given Mr. Sloan time to clean up the problems, despite the fact the bank's shares have badly underperformed big rivals over the past year. In May it also announced an additional $2 billion in cost cuts by the end of 2018.
Though the bank's shares have bounced back following the election, rising about 21%, they have lagged behind the 32% jump in the KBW Nasdaq Bank Index over the same period. The bank's shares are about flat since the beginning of the year, through Thursday.
Big banks have been expected to report softening loan growth, especially in commercial and industrial lending, based on Federal Reserve loan data. Overall, rates remain low, an environment in which Wells Fargo and its peers don't earn as much money by lending out their vast deposits.
In mid-September, Mr. Sloan said during a bank conference that the bank's loan growth was expected to be softer because of continued declines in auto loans, prepayments in the junior lien mortgage portfolio and a slower, more competitive commercial and real estate lending environment.
Costs at Wells Fargo increased 8% to $14.35 billion from $13.27 billion in the third quarter of 2016. Expenses as a share of revenue in the third quarter was 65.5% because of the $1 billion litigation accrual. That is well above the new target of 60% to 61% set at an investor presentation in May.
Mr. Sloan also said in mid-September that third-party expense, including that related to the sales scandal, is expected to remain high in the third quarter before an anticipated decline in the fourth quarter.
Write to Emily Glazer at email@example.com
(END) Dow Jones Newswires
October 13, 2017 08:47 ET (12:47 GMT)