Wells Fargo raises interest income forecast as third-quarter profit beats estimates
Wells Fargo earned $1.48 per share in the third quarter, beating analysts' expectations of $1.24
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Wells Fargo on Friday beat analysts' estimates for third-quarter profit as it benefited from customers paying more interest and raised its annual forecast for future income from interest payments.
The lender now expects 2023 net interest income (NII) - the difference between what the bank earns on loans and pays out on deposits - to be about 16% higher than a year earlier. It had earlier forecast a 14% increase.
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The swiftest tightening of U.S. monetary policy in 40 years aimed at reining in sticky inflation has buoyed banks' interest income.
NII climbed 8% to $13.1 billion in the third quarter, Wells said.
A man uses an ATM at a Wells Fargo Bank branch on a rainy morning in Washington on Jan. 17, 2012. (Reuters/Gary Cameron/File Photo/File Photo / Reuters Photos)
Shares of the bank rose 2% in premarket trading after the results.
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Wells Fargo earned $1.48 per share in the third quarter, beating analysts' expectations of $1.24, according to LSEG data.
"While the economy has continued to be resilient, we are seeing the impact of the slowing economy with loan balances declining and charge-offs continuing to deteriorate modestly," CEO Charlie Scharf said in a statement.
Wells Fargo
The bank posted a decline in total deposits to $1.34 trillion from $1.41 trillion a year earlier. As interest rates rose, some customers have moved their cash into money market funds in search of higher yields.
Deposits have also been in focus after customers precipitated the collapse of three regional lenders by rushing to pull out their money.
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Wells Fargo, which is working to fix a six-year-old scandal over sales practices, said provision for credit losses in the quarter included a $333 million increase in the allowance for credit losses primarily for commercial real estate office loans.
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Banks are anticipating weakness in commercial real estate (CRE), particularly in office loans. Financing costs have risen for many CRE owners whose buildings have higher vacancies as more employees opt to work from home.
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Wells Fargo's revenue of $20.86 billion also comfortably topped expectations of $20.11 billion in the quarter.