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

Despite building up loan loss reserves, Wells Fargo reported a profit rise on Friday due to higher interest rates. Shares of the bank spiked 1% initially but closed Friday’s session 0.1% lower. Wells Fargo’s net income increased by more than 30% to nearly $5 billion in the first quarter. The bank said its net interest income, what it makes from lending money minus what it pays out to customers, increased 45% on the back of soaring interest rates. Revenue rose 17%. “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.

Despite a rise in interest income, Wells Fargo reported that noninterest income dropped 13% in the quarter due to lower results in Wells Fargo’s affiliated venture capital and private equity businesses and a decline in mortgage banking income. Once the No. 1 player in mortgages, Wells Fargo has stepped back from the housing market. It 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.” Wells Fargo resumed its share repurchase program during the quarter, repurchasing 86.4 million shares of its common stock for $4.0 billion. As of April, the stock is up 6%, reducing its 2023 losses to about 4%.