Wells Fargo profit surges 57% as interest payments climb
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[July 14, 2023] By
Noor Zainab Hussain, Manya Saini and Saeed Azhar
(Reuters) -Wells Fargo's profit surged 57% in the second quarter as it
earned more from customer interest payments and raised its annual
forecast for net interest income (NII), sending shares up nearly 4% in
premarket trading.
Its NII climbed 29% to $13.16 billion as banks raised their borrowing
costs following a series of rate hikes by the U.S. Federal Reserve to
tame inflation.
The fourth largest U.S. lender said NII is expected to be about 14%
higher than last year's $45 billion. It had earlier forecast a 10% rise.
"The U.S. economy continues to perform better than many had expected,
and although there will likely be continued economic slowing and
uncertainty remains, it is quite possible the range of scenarios will
narrow over the next few quarters," CEO Charlie Scharf said in a
statement.
Wells Fargo set aside $1.71 billion in provisions for credit losses in
the second quarter, compared with $580 million a year ago.
REAL ESTATE WOES
Provision for credit losses included a $949 million increase in the
allowance, mainly for potential losses in commercial real estate (CRE)
office loans, as well as for higher credit card loan balances.
CRE has emerged as a big worry for banks as financing costs rise for
many buildings that have been largely vacated by employees who opt to
work remotely.
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![](../images/071423PIX/busine73.jpg)
Wells Fargo Bank branch is seen in New
York City, U.S., March 17, 2020. REUTERS/Jeenah Moon
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The higher provision also comes against the backdrop of growing
worries around the health of the economy as the collapse of three
regional lenders fueled a turmoil in the banking sector and prompted
calls for tougher regulation.
The bank reported profit of $1.25 per share for the three months
ended June 30, beating analysts' average estimate of $1.16 per
share, according to Refinitiv data.
The lender is still operating under an asset cap that prevents it
from growing until regulators deem that it has fixed problems from a
fake accounts scandal.
CEO Scharf has said Wells Fargo's repair efforts could take several
years.
Wells Fargo has struggled over the past few years to satisfy
regulators that it has fixed its problems and repaid customers who
were harmed by its sales practices.
Rival JPMorgan Chase also posted a 67% jump in second-quarter profit
as it earned more from borrowers' interest payments and benefited
from the purchase of regional lender First Republic Bank.
(Reporting by Noor Zainab Hussain and Manya Saini in Bengaluru and
Saeed Azhar in New York; Editing by Lananh Nguyen and Arun Koyyur)
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