WELLS Fargo, the fourth-largest US bank, posted a decline in revenue sending its shares down 4.9 per cent as a bank known for outsmarting rivals turned in an average performance.
Net earnings rose 50.5 per cent, but gains were driven mainly by setting aside less money to cover bad loans. The bank’s loan book shrank as outstanding loans to consumers declined and loans to companies did not grow enough to compensate.
Credit quality improved for the bank, as it did for rivals, but investors are less clear about where future profit growth will come from.
Wells Fargo’s first-quarter net income for common stockholders rose to $3.57bn (£2.2bn), or 67 cents per share, from $2.37bn, or 45 cents per share, a year earlier. Revenue fell five per cent to $20.33bn.
The bank cut the amount of money it set aside for bad loans to $2.21bn from $5.33bn a year earlier. It also released $1bn, pre-tax, from reserves.
“It’s a simple issue of their revenue being weak and their earnings before taxes and provisions being down significantly. I think that’s why the stock is down,” said Keith Davis, an analyst at Farr, Miller & Washington.
Wells Fargo was one of the biggest mortgage lenders in the US in the years leading up to the housing crisis.
City A.M. Reporter