Why it matters
Wells Fargo is one of the nation’s largest mortgage lenders, and analysts are watching the results for signs of economic strain. The bank’s non-performing loans in its business grew, but its retail business remained fairly resilient, with a slight increase in credit card delinquencies offset by a decline in auto loan losses.
The U.S. economy “continues to do better than many expected,” said Charles W. Scharf, the bank’s chief executive officer, but “there’s likely to be a prolonged economic slowdown.” Shares of the bank rose more than 2 percent on Friday , but ended the day down 0.3 percent.
Commercial real estate, particularly office loans, is a problem, and the bank has added nearly $1 billion in provisions for losses. Its deposits — a metric that has come under scrutiny this year as customers seek higher returns on their savings — declined slightly compared to last quarter.
Commercial deposits have stabilized, while on the consumer side, “the main reason for the decline is that people are spending their money,” said Michael P. Santomassimo, the bank’s chief financial officer.
background
Wells Fargo is still subject to growth restrictions imposed by the Federal Reserve in 2018 in response to the bank’s gross misconduct, including opening bogus customer accounts and improperly handling customer payments for auto and home loans. The bank expects this penalty to remain in place at least until next year.
What’s next
Like the other big banks, Wells Fargo continues to prepare for a recession — but is not yet experiencing one. “Overall I think things are going quite well”, said Mr. Santomassimo, also thanks to “a really strong employment situation”.
Other major banks will report quarterly results next week, including Bank of America, Morgan Stanley and Goldman Sachs.