By Ben Eisen
Wells Fargo said earnings surged in the first three months of the year after the banks released some of the money they had set aside for bad debts early in the pandemic.
San Francisco-based lenders posted a profit of $ 4.74 billion in the first quarter on Wednesday, up from $ 635 million in the previous year. A year ago, Wells Fargo and other major banks secured billions of dollars to prepare for the coronavirus recession, squeezing profits at the time.
Earnings per share is $ 1.05, above the 71 cents predicted by analysts’ FactSet polls.
According to Wells Fargo, sales were $ 18.60 billion, up 2% from $ 17.72 billion in the previous year. This exceeded analysts’ expectations of $ 17.52 billion.
A seven-fold increase in Wells Fargo’s profits occurred while it was being shaped for an economic revival. As a result, banks began to release some of the money they saved last year to protect them from sour loans, which boosted their bottom line.
JP Morgan Chase & Co. And Goldman Sachs Group Inc. both reported a significant increase in profits in the first quarter of Wednesday.
The boom is boosting bank investors and so far this year has increased the share of the largest lenders by far more than the wider market. Wells Fargo, which was behind last year, was one of the biggest drivers of the year, rising 32% so far in 2021. In pre-market trading on Wednesday, stock prices fell slightly.
Consumers and businesses can still default on a large scale when government aid programs wear out, but banks have determined they are unnecessarily pocketing at the beginning of the crisis. Wells Fargo said it released $ 1.05 billion from reserves in the first quarter. Net bad debt amortization has decreased from a year ago.
Wells Fargo operates under a three-year-old cap on its growth as a punishment for fake account scandals in 2016. As a result, executives are turning to cost savings.
Bank expenses decreased from the previous quarter, but still increased from a year ago. Total for the first quarter was $ 13.99 billion, an increase of 7% from $ 13.05 billion in the previous year.
Wells Fargo executives said earlier this year that they would like to cut at least $ 8 billion from their annual budget and recognize about $ 3.7 billion this year. Banks have fired employees, closed branches and reduced office space. The number of people in the first quarter decreased by about 4,000.
Banks are also plagued by low interest rates, which cut into the difference between what they pay to borrow money and what they lend and earn. Wells Fargo said net interest income fell 22% from $ 11.31 billion last year to $ 8.8 billion.
Non-interest income, including fees, increased 45% from $ 6.41 billion in the previous year to $ 9.27 billion.
Write to Ben Eisen at email@example.com
(End) Dow Jones News Wire
April 14, 2021 09:36 ET (13:36 GMT)
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Wells Fargo’s earnings skyrocket as the economy recovers — second update
Source link Wells Fargo’s earnings skyrocket as the economy recovers — second update