Wells Fargo overcomes pandemic, fake-account fallout in return to profitability

Net interest income fell 19% from a year ago

Wells Fargo & Co. returned to profitability in the third quarter after the lender writing off fewer loans amid a downturn related to the COVID-19 pandemic.

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The San Francisco-based lender earned $2.04 billion, or 42 cents per share, missing the 45 cents that Wall Street analysts surveyed by Refinitiv were expecting. The results, which included $718 million in restructuring charges, were an improvement from last quarter’s $2.38 billion loss, but marked a 56% decline from the $4.61 billion earned a year ago.

Revenue, meanwhile, fell 14% to $18.9 billion, outpacing the $17.98 billion that was anticipated.

TickerSecurityLastChangeChange %
WFCWELLS FARGO & COMPANY23.05+0.35+1.56%

“Strong mortgage banking fees, higher equity markets, and declining sequential charge-offs positively impacted our results, while historically low interest rates reduced our net interest income and our expenses continued to remain elevated,” CEO Charlie Scharf said in a statement.

Net interest income fell 19% from a year earlier to $9.37 billion, driven by the Federal Reserve holding its key interest rate near zero as it insulates the economy from the COVID-19 pandemic.

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Those same low interest rates, however, helped triple mortgage banking income, which reached $1.6 billion. Net mortgage servicing income totaled $341 million, up from a $689 million loss in the previous quarter.

Wells said its pre-tax earnings saw a $961 million hit due to customer remediation accruals, a sign the fake accounts scandal was still hurting its bottom line.

The firm has been under close regulatory watch since 2016 when the accounts were disclosed, eventually leading to billions in fines and ending the tenure of two previous CEOs.

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Wells Fargo shares were down 55% year-to-date through Tuesday.