Wells Fargo Earnings Jump as Economy Bounces Back -- 2nd Update
By Ben Eisen
Wells Fargo & Co. said earnings soared in the first three
months of the year after the bank released some of the money it put
aside for bad loans earlier in the pandemic.
The San Francisco-based lender on Wednesday posted a profit of
$4.74 billion for the first quarter, up from $653 million a year
earlier. A year ago, Wells Fargo and other big banks set aside
billions of dollars to prepare for a coronavirus recession,
hammering their profits at the time.
Per-share earnings were $1.05, beating the 71 cents forecast in
a FactSet poll of analysts.
Wells Fargo said it had revenue of $18.06 billion, up 2% from
$17.72 billion a year earlier. That beat the $17.52 billion
expected by analysts.
Wells Fargo's sevenfold rise in profits came during what is
shaping up to be an economic resurgence. That has prompted banks to
release some of the money they stowed away last year to protect
against soured loans, which has boosted their bottom lines.
JPMorgan Chase & Co. and Goldman Sachs Group Inc. both
reported sharply higher first-quarter profits on Wednesday.
The buoyant economy has been a boost for bank investors, lifting
shares of the largest lenders far more than the broader market so
far this year. Wells Fargo, a laggard last year, has been among the
biggest gainers this year, rising 32% so far in 2021. In premarket
trading on Wednesday, shares fell slightly.
While consumers and businesses could still default en masse when
government aid programs wear off, banks are deciding they pocketed
more than they needed at the beginning of the crisis. Wells Fargo
said that it released $1.05 billion from its reserves in the first
quarter. Net charge-offs declined from a year ago.
Wells Fargo is operating under a three-year-old cap on its
growth, punishment for its 2016 fake-account scandal. That has
pushed executives to turn to cost-cutting.
The bank's expenses declined from the previous quarter, but were
still up from a year ago. They totaled $13.99 billion in the first
quarter, up 7% from $13.05 billion a year earlier.
Wells Fargo executives said earlier in the year that they wanted
to cut at least $8 billion from the annual budget and recognize
roughly $3.7 billion of it this year. The bank has been laying off
employees, closing branches and shrinking its office space. Head
count shrank by about 4,000 in the first quarter.
Banks have also been challenged by low interest rates, which
have eaten into the difference between what they pay to borrow
money and what they earn lending it out. Wells Fargo said its net
interest income fell 22% to $8.8 billion from $11.31 billion a year
Noninterest income, which includes fees, rose 45% to $9.27
billion from $6.41 billion a year earlier.
Write to Ben Eisen at email@example.com
(END) Dow Jones Newswires
April 14, 2021 09:36 ET (13:36 GMT)
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