why it matters
Wells Fargo is one of the nation’s largest mortgage lenders, and analysts are watching its earnings for signs of economic stress. Deteriorated loans in the bank’s commercial business increased, but its consumer business performed fairly well, with a slight increase in credit card defaults offset by lower auto loan losses.
Chief Executive Officer Charles W. The bank’s stock rose more than 2% on Friday.
Loans to commercial real estate, especially office space, have been a problem, and the bank has set aside nearly $1 billion more to cover losses. The company’s deposits, a metric under scrutiny this year as customers seek higher returns on savings, fell slightly from the previous quarter.
Commercial deposits have been stable, but on the consumer side, “the decline is largely driven by how people spend their money,” said Michael P. Santomassimo, the bank’s chief financial officer.
Background
Wells Fargo fell under growth restrictions imposed by the Federal Reserve in 2018 after the bank’s notable misconduct, including opening fake customer accounts and mishandling customers’ auto and mortgage payments. and is still in business. The bank expects the penalty to last at least until next year.
what’s next
Like other big banks, Wells Fargo is bracing for a recession, but there are no signs of it yet. “Overall, I think things are going very well,” Santomassimo said.“
More big banks, including Bank of America, Morgan Stanley and Goldman Sachs, will report quarterly results next week.
