Wells Fargo’s first-quarter profit and revenue top the Street

Wells Fargo reported growing profits Friday as the bank benefited from higher interest rates, despite building up loan loss reserves.

Here’s how the bank did compared with Refinitiv estimates:

• Earnings per share: $1.23 per share GAAP versus 90 cents a year ago and $1.13 expected.
• Revenue: $20.73 billion versus $20.08 billion expected.

The bank’s shares were up more than 3% in premarket trading after the earnings report.

Wells Fargo increased its net income by more than 30% to nearly $5 billion in the first quarter from a year ago. The bank said its net interest income, what it makes lending money minus what it pays out to customers, increased 45% on the back of soaring interest rates.

“We had strong results in the first quarter including revenue growth from both the fourth quarter and a year ago, and we continued to make progress on our efficiency initiatives,” CEO Charlie Scharf said in a statement.

However, in the latest period, the bank set aside $1.2 billion for credit losses after reducing its provisions by $787 million a year ago. The provision included a $643 million increase for potential losses related to commercial real estate, credit card and auto loans.

While interest income climbed, Wells Fargo said it noninterest income decreased 13% in the quarter, driven by lower results in its affiliated venture capital and private equity businesses as well as a decline in mortgage banking income.

Wells Fargo, once the No. 1 player in mortgages, has stepped back from the housing market. The bank recently laid off hundreds of mortgage bankers as part of a sweeping round of cuts triggered by the bank’s recent strategic shift.

“Looking ahead, we continue to move forward on our risk and control agenda, which is our top priority,” Scharf said. “While we have made progress, our work is not done, and we remain focused on completing the work in a timely fashion.”

The bank resumed its share repurchase program during the quarter, buying bank 86.4 million shares, or $4.0 billion, of common stock.

The stock is up 6% in April, trimming its 2023 losses to about 4%.