Wells Fargo & Co., the lender whose chief executive officer stepped down this week amid a scandal in its branch network, posted a third-quarter profit that beat analysts' estimates as loan-loss provisions improved and revenue from mortgage banking increased.
Net income slid to $5.64 billion, or $1.03 a share, from $5.8 billion, or $1.05 a share, a year earlier, the San Francisco-based company said Friday in a statement. The average estimate of 28 analysts surveyed by Bloomberg was for per-share profit of $1.01. Total revenue increased 1.8% to $22.3 billion, exceeding analysts' expectations.
Last month's revelation that employees may have opened millions of unauthorized accounts has stained the bank's reputation and prompted Wednesday's resignation of CEO and Chairman John Stumpf. The scandal is forcing the firm to scale back its push to sell more products to customers, while officials including California's treasurer call on government agencies to suspend dealings with the company.
Customer visits with branch bankers fell 10% in September compared with the previous month, while the number of consumer checking accounts opened dropped about 30%, Wells Fargo said Friday in a slide presentation, without giving a cause for the declines. Credit-card applications were down 20% from a year earlier, the bank said.
"We know that it will take time and a lot of hard work to earn back our reputation," Tim Sloan, who replaced Stumpf as CEO, said in the statement. "We will work tirelessly to build a stronger and better Wells Fargo."
Total loans increased less than 1% to $961.3 billion from the previous quarter, while mortgage banking revenue climbed 4.9% to $1.67 billion, according to the statement. Expenses rose 7% to $13.3 billion on higher compensation costs and litigation accruals.
Third-quarter provisions for credit losses declined 25% to $805 million from the previous quarter and climbed 15% from a year earlier, Wells Fargo said. Net interest income, including the loan-loss provision, increased 3.7% to $11.1 billion.
Wells Fargo's stock is down 18% this year, with much of the drop following a $185 million settlement last month with authorities including the Consumer Financial Protection Bureau. Investigators said the bank may have opened more than 2 million deposit accounts and credit cards for unwitting customers, generating fees and damaging credit scores.
The abuses triggered public outcry, probes by other agencies and hearings on Capitol Hill, where lawmakers including Sen. Elizabeth Warren, D-Mass., urged Stumpf to resign. Politicians and labor groups said the company put undue pressure on workers to meet sales goals, then blamed them for misconduct without holding senior leaders accountable.
The scandal was rooted in the bank's retail unit, which historically generates about 60% of Wells Fargo's profit. For the quarter, the division's net income declined 9.4% to $3.23 billion from a year earlier, while revenue fell 4.2% to $12.4 billion.
Stumpf agreed on Sept. 27 to forgo more than $41 million in pay, the biggest forfeiture of compensation from a major U.S. bank chief since at least the 2008 financial crisis. Former community banking chief Carrie Tolstedt, who oversaw the business during the years authorities found abuses and has since left the firm, will waive about $19 million in unvested stock, the company said. She won't receive severance, the bank said Friday.
Third-quarter profit from wholesale banking rose 6.3% to $2.05 billion from a year earlier, while wealth-management net income gained 12% to $677 million, according to the statement.
Net interest margin, the difference between what a bank earns on loans and pays to depositors, was 2.82%, a four-basis-point decline from the previous quarter. Return on equity fell about a percentage point to 11.6% from a year earlier.
