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 earlier.

Noninterest income, which includes fees, rose 45% to $9.27 billion from $6.41 billion a year earlier.

Write to Ben Eisen at ben.eisen@wsj.com

 

(END) Dow Jones Newswires

April 14, 2021 09:36 ET (13:36 GMT)

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