Wells Fargo Profit Rises 32% Amid Cost Cutting

Date : 10/12/2018 @ 10:02AM
Source : Dow Jones News
Stock : Wells Fargo & Company (WFC)
Quote : 54.46  0.73 (1.36%) @ 6:21PM

Wells Fargo Profit Rises 32% Amid Cost Cutting

Wells Fargo (NYSE:WFC)
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By Emily Glazer 

Wells Fargo & Co. said its third-quarter profit jumped 32% as it continued to cuts costs and boost its businesses while trying to move past regulatory problems.

Shares rose about 1.5% after the results were announced.

The bank reported a profit of $6.01 billion, or $1.13 a share. Analysts polled by Refinitiv had expected earnings of $1.17 a share.

Revenues rose to $21.94 billion from $21.85 billion in the year-earlier period.

Wells Fargo's return on equity, a key measure of profitability, increased in the third quarter to 12.04%.

The San Francisco-based lender is still struggling to move past the sales-practices scandal that erupted in its retail ban k about two years ago. Problems have extended to the bank's other business lines, and the bank is facing numerous regulatory investigations.

For Chief Executive Timothy Sloan, the more immediate concerns are around growth and costs.

In late September, the bank said it plans to cut as many as 26,500 jobs over the next three years, or up to 10%, as it adjusts to changing consumer behavior.

Wells Fargo also remains under an unprecedented growth cap from the Federal Reserve. In September, Chief Financial Officer John Shrewsberry said the bank expects the Fed to lift the asset cap in the first half of 2019.

Wells Fargo had been one of the most consistent big banks at growing earnings and revenue. But its shares have largely underperformed peers following the sales-practices scandal.

Since then, the bank has disclosed an array of problems in its wealth-management business and more recent compliance concerns in its wholesale banking division that serves corporate clients.

The sales scandal and other regulatory investigations have boosted expenses in recent quarters, yet costs fell 4% in the third quarter to $13.76 billion. The bank, however, posted $605 million in operating losses stemming from customer refunds, including $241 million related to improper auto loan charges.

It notched a one-time gain of $638 million from the sale of $1.7 billion of Pick-a-Pay mortgage loans.

Profits in Wells Fargo's community-banking unit, which includes the unit responsible for the questionable sales tactics over the past several years, were $2.82 billion, jumping 50% from the $1.88 billion it earned in the third quarter of 2017.

Wells Fargo's mortgage business, the largest in the U.S. by volume, earned $846 million in fees in the third quarter, down 19% from the $1.05 billion it earned in same period a year ago. The bank extended $46 billion in home loans between the end of June and the end of September, compared with $50 billion in the second quarter of 2018 and $59 billion in the third quarter of 2017.

Wells Fargo's loan book shrunk. Total loans at the end of the third quarter tallied $942.3 billion, a decrease from $951.87 billion in the same period a year ago. Commercial loans, which make up one of the largest parts of the bank's total portfolio, were $501.89 billion, up from $500.15 billion in the third quarter of 2017.

Despite the overall loan decline, the profitability of the bank's lending activities rose. Wells Fargo's net interest margin, a measure of how profitably it can lend out its customers' deposits, rose to 2.94% from 2.93% at the end of June and 2.87% in the third quarter a year ago.

Write to Emily Glazer at emily.glazer@wsj.com

 

(END) Dow Jones Newswires

October 12, 2018 09:47 ET (13:47 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.

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