Wells Fargo’s third-quarter earnings were disappointing, and its net interest income declined by 19 percent to $9.368 billion compared to the same period one year ago. Low-interest rates imposed by the federal government are said to be putting pressure on the banking industry. The FEDs have lowered rates as a response to the COVID-19 pandemic.
Charles Scharf, CEO of Wells Fargo, said: “Our third-quarter results reflect the impact of aggressive monetary and fiscal stimulus on the U.S. economy. Strong mortgage banking fees, higher equity markets, and declining sequential charge-offs positively impacted our results. At the same time, historically low interest rates reduced our net interest income, and our expenses continued to remain elevated.”
The San Francisco-headquartered bank also had more good news for investors. It had put aside $769 million in anticipation of credit losses for the quarter. Its non-interest income was also above analysts’ expectations and came in at $9.5 billion, thanks to credit card, deposit, and investment fees growing from each quarter. Income from mortgages also rose from $317 million to $1.6 billion during the second quarter.
Still, overall Wells Fargo shares are 54 percent lower so far this year. The bank was also recovering from a fake-account scandal that took place four years ago.
But, Wells Fargo isn’t the only bank that has lagging shares. Bank of America is 29.2 percent down, while JP Morgan Chase is 27.7 percent lower thus far in 2020.
Wells Fargo was previously forecast to have $17.978 billion in revenue and ended the quarter with $18.86 billion in revenue. Shares were also three cents lower than predicted at 42 cents a share. Meanwhile, in pre-market trading, shares were 1.9 percent lower.
Scharf added, “The trajectory of the economic recovery remains unclear as the negative impact of COVID continues and further fiscal stimulus is uncertain, but we remain strong with our capital and liquidity levels well above regulatory minimums.”