Wells Fargo profit rises on interest income, trading boost
Its net profit came in at US$5.25 billion, or US$1.60 per share
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WELLS Fargo’s profit rose in the first quarter, aided by higher income from interest payments and increased trading gains from volatile markets.
The lifting of a seven-year, US$1.95 trillion asset cap on Wells Fargo last year has allowed the bank to expand its balance sheet and pursue stronger growth in all of its core businesses.
Wells Fargo is betting on growth in its credit card and autos businesses to lift loan growth this year. A string of rate cuts by the US Federal Reserve in recent months has also encouraged customers to take on more debt.
“While markets have been volatile, we still see continued resiliency in the underlying economy, and the financial health of the consumers and businesses we serve remains strong, though the impact of higher oil prices will likely take some time to materialize,” CEO Charlie Scharf said in a statement.
Wells Fargo’s net interest income — the difference between earnings on loans and payments on deposits — rose 5 per cent to US$12.1 billion in the quarter from a year earlier.
Shares of the San Francisco, California-based company fell 1.3 per cent in premarket trading. The stock had slipped 7 per cent so far this year, as of last close.
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Stock markets navigated a tough landscape in the first quarter, as fears around artificial intelligence disrupting software companies and private credit worries unnerved investors.
Market jitters intensified in March with the outbreak of the US–Israeli war with Iran, as concerns over oil supply disruptions from a blockage of the Strait of Hormuz, which carries one-fifth of global oil, stoked stagflation fears.
But volatility tends to be a boon for bank trading desks as investors increasingly rejig their portfolios to hedge against risks.
Wells Fargo’s markets revenue surged 19 per cent to US$2.17 billion in the quarter ended March 31 from a year earlier.
Net profit came in at US$5.25 billion, or US$1.60 per share, the fourth-largest US lender said on Tuesday.
That compares with US$4.89 billion, or US$1.39 per share, the company reported a year earlier.
Private credit in spotlight
The high-profile bankruptcies of US auto parts supplier First Brands and car dealership Tricolor last year have brought into the spotlight Wall Street banks’ exposure to so-called non-depository financial institutions (NDFIs) such as private equity and private credit managers.
Concerns around private credit have deepened in recent months, as a wave of negative headlines drew intense scrutiny to the asset class that has expanded rapidly over the past decade.
Wells Fargo had US$210.2 billion in so-called financials, except banks loans outstanding, as of March 31, according to its presentation.
Headcount continues to fall
Wells Fargo had 200,999 employees at the end of March, compared with 205,198 as of Dec 31. Its headcount has fallen every quarter since late 2020.
Under Scharf’s leadership, Wells Fargo has streamlined its workforce, prioritising efficiency and cost cuts to fund long-term growth initiatives.
Scharf said last year that Wells Fargo will keep trimming headcount as the bank focuses on becoming more efficient, adding that artificial intelligence presents a major opportunity to boost productivity. REUTERS
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