Wells Fargo posts fourth straight revenue miss on mortgage issues
Wells Fargo & Co reported an 19 percent profit decline on Friday and weaker revenue than Wall Street had expected for the fourth consecutive quarter due to mortgage issues, sending its shares down 3.5 percent.
The third-largest U.S. lender, which has been embroiled in a prolonged scandal over its sales practices, said the dip in earnings came largely from a $1 billion accrual for a legal settlement over issues stemming from before the 2007-2009 financial crisis.
But revenue at the bank also suffered from a decline in mortgage banking revenue. Wells has been trying to bounce back from a scandal over dishonest sales practices that led to interrogations by U.S. Congress and fueled the ire of millions of consumers.
Wells Fargo`s earnings dropped to $4.6 billion during the third quarter. On an adjusted basis, its profit was $1.04 per share, scraping past estimates of $1.03, according to Thomson Reuters I/B/E/S.
Revenue fell 2 percent to $21.9 billion, hit by a 37 percent slump in mortgage banking. Analysts had forecast revenue of $22.4 billion.
Its shares fell 3.6 percent to $53.30 in early trading.
Wells Fargo`s operating efficiency ratio, which measures expenses as a portion of revenue, was 65.5 percent during the quarter and 63.1 percent year to date.
Expenses have been a key issue for investors, and the bank has targeted a full-year ratio of 60 percent to 61 percent in 2017, aiming to improve to 55 percent to 59 percent next year.
Wells is committed to its plan to cut costs by $4 billion by the end of 2019, half of which will be reinvested into businesses, Chief Financial Officer John Shrewsberry said in a statement.
Net income in Wells Fargo`s community banking segment, the largest of its three major businesses and the one most directly impacted by the sales scandal, was $2.2 billion, down 31 percent from a year ago due to the legal charge.
Wells Fargo is the largest U.S. residential mortgage lender, making more than $98 billion worth of loans in the first half of the year, according to trade publication Inside Mortgage Finance.
That is nearly double the total for JPMorgan Chase & Co, the number two mortgage lender. Wells Fargo has been keeping a greater share of the mortgages it makes, boosting loan growth.
(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)
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