New York (CNN Business)The Wells Fargo stagecoach is still broken.
The troubled bank reported a 56% decline in profits Wednesday, far exceeding the drops rivals have reported for the quarter. And earnings of 42 cents per share missed estimates. Wells Fargo’s profit drop was driven in part by continued fallout from the bank’s various scandals. It reported nearly $1 billion of expenses linked to refunds for customers harmed by what the Federal Reserve has called “widespread consumer abuses.”
That hit to the bottom line is in sharp contrast to rivals. Citigroup (C) and Bank of America (BAC) reported this week more modest third-quarter profit drops of 35% and 16%, respectively — while JPMorgan Chase (JPM), the nation’s largest and bank, posted a surprise 4% increase in profit.More than those peers, Wells Fargo (WFC) is getting dinged by near-zero interest rates. Read MoreNet interest income, a key metric of bank profitability, tumbled 19% to $9.4 billion. While all banks are grappling with historically low interest rates, Wells Fargo can’t offset that pain by aggressively lending — because of sanctions from the Fed that prevent it from growing its balance sheet.”Historically low interest rates reduced our net interest income and our expenses continued to remain elevated,” Wells Fargo CEO Charlie Scharf said in a statement. Wells Fargo also continues to grapple with far higher expenses than its rivals.Noninterest expenses climbed another 5% compared with the second quarter. And the bank reported $718 million of restructuring charges, mostly because of severance packages paid to laid off workers. Wells Fargo’s headcount stood at 274,900 as of the end of September, down by 2,200 from the year before.The good news is that Wells Fargo’s revenue fell only 14%, exceeding Wall Street estimates. The bank’s credit metrics also improved: Wells Fargo set aside $769 million to cushion the blow from bad loans, which is down sharply from the $9.5 billion it set aside during the second quarter.
Still, Wells Fargo’s results provide yet more evidence of how it has become the nation’s weakest big bank. The Warren Buffett-backed bank has lost more than half its value so far this year, badly trailing its peers. Last quarter, Wells Fargo was the only one to lose money, its first loss since the 2008 financial crisis. Wells Fargo is also the only major lender to cut its dividend, a rare step it last made during the Great Recession.
Source: edition.cnn.com
