Wells Fargo Reports 7% Profit Decline in Q1 Due to Lower Interest Income

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Wells Fargo’s first-quarter profit dropped by 7% as the cost of paying customers for deposits increased, and demand from borrowers decreased, the bank revealed on Friday.

However, adjusted profit of $1.26 per share surpassed analysts’ expectations of $1.11, supported by revenue growth in corporate and investment banking, which rose by nearly 5%. Despite this, shares declined by 1.6% in early trading.

The bank’s interest income was impacted as it paid more to retain deposits from customers seeking higher yields, while loans saw a decline.

Wells Fargo’s finance chief, Michael, highlighted the challenge of forecasting Net Interest Income (NII) amidst volatility and uncertainty in client behavior. The bank reiterated its projection of a 7% to 9% decrease in NII for the year.

In the first quarter, Wells Fargo reduced allowances for credit losses on office loans by $76 million to $2.4 billion. Despite concerns about weakness in multi-family buildings, the bank remains confident in the overall health of its portfolio.