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Wells Fargo revenue suffers on mortgage banking slump
[BENGALURU] Wells Fargo & Co, which has been embroiled in a prolonged scandal over its mortgage and sales practices, on Friday missed Wall Street revenue estimates for a fourth straight quarter, sending its shares down 3 per cent.
Revenue at the bank has suffered as it tries to bounce back from dishonest practices that led to a severe grilling by Congress and faced the ire of millions of consumers. But the problems have taken a toll on the third largest US bank.
In the latest quarter, earnings fell 19 per cent to US$4.6 billion as it bore costs related to old mortgage problems. On an adjusted basis, the bank earned $1.04 per shares, scrapping past estimates of US$1.03, according to Thomson Reuters.
Revenue fell 2 per cent to US$21.9 billion, hit by a 37 per cent slump in mortgage banking. Analysts had forecast revenue of US$22.4 billion.
Total expenses rose 8.2 per cent to US$14.35 billion.
Wells Fargo's operating efficiency ratio was 65.5 per cent. Operating efficiency is a closely-watched metric that looks at expenses as a percentage of revenues.
Net income in Wells Fargo's Community Banking segment, the largest of its three major businesses and the one most directly impacted by the sales scandal, was US$2.2 billion down 31 per cent from a year ago due to the charge.
Wells Fargo is the largest US residential mortgage lender, making more than US$98 billion worth of loans in the first half of the year, according to the trade publication Inside Mortgage Finance.
That is nearly double the total for JPMorgan, the number two mortgage lender. Wells Fargo has been keeping a greater share of the mortgages it makes, boosting loan growth.