Weaker Profit Margin Sends Wells Fargo Shares Lower
Wells Fargo posted earnings and revenue that topped expectations Friday, driven by robust loan growth, but shares fell amid disappointment with the profit margin in the bank's lending business.
Wells Fargo posted net interest margin for the quarter of 3.56 percent, down from 3.89 percent in the year-earlier period. Analysts has been expecting net margin of around 3.67 percent.
In a CNBC interview, CFO Tim Sloan said that the bank's net interest margin fell because deposits grew.
"We'll take that problem all day long," he said. "We love growing deposits. It grows relationships, it grows customers and it allows us to grow our fee income over time."
Wells posted earnings excluding items of 89 cents a share, on revenue of $21.9 billion.
Wall Street had expected Wells Fargo to report earnings excluding items of 88 cents a share on $21.29 billion in revenue, according to Thomson Reuters consensus estimates.
"The company's underlying results were driven by solid loan growth, improved credit quality, and continued success in improving efficiency," Sloan said in a statement.
The bank reported total loans of $799.6 billion, up $16.9 billion from the previous quarter, including double-digit growth in commercial banking, credit card, mortgage, and retail brokerage.
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Wells Fargo, the largest U.S. home lender, said fees from mortgages climbed to $3.1 billion from $2.4 billion a year ago as homeowners continued to refinance their homes at low rates. The bank issued $125 billion in mortgages during the quarter, which was down from $139 billion in the third quarter.
The bank's provision for loan losses fell to $1.8 billion from about $2 billion a year ago as borrowers continued to do a better job of making their payments.
The results included a previously announced pre-tax charge of $644 million for Wells Fargo's share of an $8.5 billion settlement that ends a U.S. government-mandated review of financial crisis-era foreclosures.
On Monday, Bank of America announced roughly $11.6 billion of settlements with mortgage finance company Fannie Mae and a $1.8 billion sale of collection rights on home loans, in a series of deals meant to help the bank move past its disastrous 2008 purchase of Countrywide Financial.
Other upcoming bank earnings reports include those from JPMorgan, Bank of America, and Citigroup. Financial shares have rallied over the last month in anticipation of solid earnings, with Wells up more than 6 percent since the beginning of December.
—Reuters contributed to this article.