Mortgage giant weathers interest rate pressure
Wells Fargo has reported its financial results for the first quarter of 2024, revealing a mix of increased revenue in some sectors but decreased net interest income.
Despite challenges, home lending revenue remained stable, with a 3% rise in mortgage banking income ($864 million), offsetting the impact of reduced net interest income from lower loan balances.
Net interest income fell 8% year over year as higher interest rates led to increased funding costs. This was somewhat mitigated by better yields on earning assets, according to the bank’s earnings report.
“The investments we are making across the franchise contributed to higher revenue versus the fourth quarter as an increase in noninterest income more than offset an expected decline in net interest income,” it was explained.
Meanwhile, noninterest expenses went up 5% from a year ago due to a mix of higher operational losses, including customer remediation for past issues, increased FDIC assessments, and higher compensation costs linked to revenue in Wealth and Investment Management.
Wells Fargo’s credit quality was relatively consistent, according to Wells Fargo chief Charlie Scharf.
“Net charge-offs were stable from the fourth quarter as credit trends remained consistent with recent performance,” said Scharf.
He noted declines in net loan charge-offs for commercial real estate and auto loans, partially offset by a higher allowance for credit card loans. The bank also reduced its allowance for credit losses in the CRE segment in the first quarter.
Nonperforming assets decreased 2% to $203 million, driven by lower commercial real estate nonaccrual loans, mostly in Well’s office portfolio.
Scharf also highlighted the termination of a 2016 consent order by the Office of the Comptroller of the Currency (OCC) related to sales practices as a step forward in the bank’s reform efforts.
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“The closure of this order is an important step forward and is confirmation that we operate much differently today around sales practices,” Scharf added. “It is the sixth enforcement action against Wells Fargo that our regulators have closed since 2019. The remaining risk and control work continues to be our top priority and we will not be satisfied until all work is complete.”
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