Wells Fargo Posts Weaker Earnings -- Update
October 13 2017 - 9:02AM
Dow Jones News
By Emily Glazer
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 emily.glazer@wsj.com
(END) Dow Jones Newswires
October 13, 2017 08:47 ET (12:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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