Wells Fargo beat sales and profit targets in the first quarter compared with a year earlier, boosted by higher interest rates.
The quarter saw the collapse of two banks that rattled the financial sector and the broader stock market. Wells Fargo participated with other banks in pumping $30 billion in deposits into First Republic Bank in a so far successful effort to prevent a third failure.
Wells said Friday that it earned $5 billion, or $1.23 per share, in the three months ended March 31, beating analyst projections by 10 cents a share. Revenue of $20.7 billion topped Wall Street’s target of $20.1 billion, a 17% increase.
Wells’ profit rose 32% from last year, when the San Francisco-based bank posted net earnings of $3.8 billion, or 91 cents per share.
Wells, which until recently was the U.S.’s biggest mortgage lender, set aside $643 million for potential loan losses, specifically commercial real estate loans, credit cards and auto loans.
The bank has said it plans to drastically reduce its mortgage lending business. Higher interest rates have chilled the housing market, and Wells said home lending was down 42% from the same quarter last year.
Wells had $13.3 billion in net interest income in the period, slightly less than last quarter’s $13.4 billion, but well ahead of the $9.3 billion from the same period a year ago. Wells reaffirmed guidance for full-year net interest income, which it projects to be about 10% higher than 2022’s $45 billion.
Credit card revenue was up 3% to $1.3 billion in the period while personal lending rose 9% to $318 million.
Like other banks, Wells has benefitted from the Federal Reserve’s aggressive interest rate hikes as the central bank tries to tamp down the highest inflation in four decades. Fed officials have signaled that they may raise the central bank’s main borrowing rate another quarter point this year which would bring it slightly above 5%.
Wells is still trying to exit the strict federal guidelines imposed in 2018 that sets its asset cap at just under $2 billion after a series of scandals, including the uncovering of millions of fake checking accounts its employees opened to meet sales quotas. That order was expected to last only a year or two, but additional improprieties have surfaced and regulators have been skeptical about the bank’s efforts to clean up its act.
Shares of Wells Fargo rose 2.5% in premarket trading.