Meanwhile, its mortgage banking income slumps in Q1
Wells Fargo has reported strong earnings for the first quarter of 2023 as the banking giant continued to retreat from mortgage lending and shift to a “smaller, less complex business.”
The bank generated a net interest income of $13.3 billion in Q1, a 45% gain from a year ago but down 1% from Q4 2022. Wells Fargo said the increase was primarily due to the impact of higher interest rates, higher loan balances, and lower mortgage-backed securities premium amortization, partially offset by lower deposit balances. Total revenue was $20.7 billion, up 3% month over month and 17% year over year.
“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,” Wells Fargo CEO Charlie Scharf said in the company’s earnings report. “Delinquencies and net charge-offs continued to slowly increase, as expected. Our CET1 ratio, which was already strong, increased, and we resumed our repurchase program, buying back $4 billion in common stock.”
Wells Fargo, which used to be the largest mortgage provider in the country, downsized its home lending business early this year. The company posted a 42% year-over-year slump in its mortgage banking income driven by lower originations and lower revenue from the re-securitization of loans purchased from securitization pools.
As part of its new strategic plans, Wells Fargo laid off more than 500 workers in February. The company’s new strategy involves reducing the size of its servicing portfolio and closing its correspondent channel.
“We announced in January strategic plans to create a more focused home lending business,” Wells Fargo told Bloomberg. “As part of these efforts, we have made displacements across our home lending business in alignment with this strategy and in response to significant decreases in mortgage volume in the broader market environment.”
Commenting on the recent bank closures, Scharf said: “We are glad to have been in a strong position to help support the US financial system during the recent events that impacted the banking industry… Our diversified business model, strong capital position, mix of deposits, access to funding sources, and continued focus on financial and credit risk management allow us to support our customers throughout the economic cycle.
“Looking ahead, we continue to move forward on our risk and control agenda, which is our top priority. While we have made progress, our work is not done, and we remain focused on completing the work in a timely fashion. At the same time, we are executing on our other strategic objectives, including developing improved products and services to better serve our customers, investing in our communities, and generating appropriate risk-adjusted returns.”
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