Wells Fargo shares slipped after reporting third-quarter earnings slightly below expectations on Tuesday, as a key measure of the bank’s profitability continued to slide as it undergoes a restructuring.
The bank reported net income of $4.6 billion in the third quarter, down 23% from the same period last year. Wells Fargo’s net interest income, a critical part of bank profits, was just below estimates at $11.63 billion. Net interest margin, or NIM, dropped to 2.66%, down from 2.94% for the quarter a year ago.
Here’s how the company did, compared with what Wall Street expected:
- Earnings: $1.12 a share adjusted vs. $1.15 a share expected according to analysts surveyed by Refinitiv.
- Revenue: $22.01 billion vs. 21.19 billion expected according to analysts surveyed by Refinitiv.
Shares of Wells Fargo slipped 1.2% in premarket from its previous close of $49.27 a share. The bank’s stock was up 7% for this year before the report.
Last month, the bank’s board of directors named Charles Scharf as CEO and president. Scharf, formerly the chairman and CEO of BNY Mellon, will take over for Tim Sloan at Wells Fargo on Monday.
The nation’s fourth-largest bank, Wells Fargo has been mired in restructuring and regulatory scrutiny since 2016. Under former CEO John Stumpf, Wells Fargo employees had created millions of fake bank accounts to meet sales quotas. With the bank’s reputation damaged, Sloan had taken the reins from Stumpf. But Sloan resigned abruptly in March of this year.
Wells Fargo reported a $1.6 billion litigation charge during the third quarter, citing the continued ramifications from the sales scandal.
“We have more work ahead, but I’m confident that our focused efforts and the fundamental strengths of Wells Fargo will continue to enable us to achieve success,” Wells Fargo interim CEO Allen Parker said in a statement on Tuesday.
In 2018, the Federal Reserve capped Wells Fargo’s asset growth under $1.95 trillion, after the bank discovered further problems with how it treated customers. The cap will stay in place through the end of the year, in a rare move the central bank took to push Wells Fargo to fix its risk management problems.
Wells Fargo’s loan balances at the end of September totaled $954.9 billion, up $5 billion from the previous quarter. While the bank reported unchanged commercial loans, consumer loans made up the $5 billion increase, driven by more family real estate mortgages as well as more credit card and auto loans.