Wells Fargo earnings boosted by release of $1.6 billion in loan loss reserves

Wells Fargo & Co.
WFC,
-2.40%

posted stronger-than-expected profit and revenue for the first quarter, boosted by the release of $1.6 billion in its reserves for credit losses. The San Francisco-based bank posted net income of $4.742 billion, or $1.05 a share, in the quarter, up from $653 million, or 1 cent a share, in the year-earlier period. Revenue rose to $18.063 billion from $17.717 billion. The FactSet consensus was for EPS of 71 cents and revenue of $17.518 billion. Chief Executive Charlie Scharf said earnings were boosted by an improving U.S. economy as well as the big reduction in loan loss reserves as loans did not sour during the pandemic as feared. “Charge-offs are at historic lows and we are making changes to improve our operations and efficiency, but low interest rates and tepid loan demand continued to be a headwind for us in the quarter,” Scharf said in a statement. Net interest income fell 22%, mostly due to low interest rates. Noninterest income rose 45%, as the year-earlier period included securities impairments and lower deferred compensation plan investment results, mostly due to lower market valuations at the start of the coronavirus pandemic. Revenue at the consumer and small business segment was down 6%, while home lending was up 19%. Credit card revenue fell 2%, due to lower balances on elevated payment rates. Auto revenue rose 6%, while personal lending was down 18%. Corporate and investment banking revenue fell 6%. Markets revenue rose 19%, on higher demand for asset-backed finance products, other credit products and municipal bonds, which were offset by lower demand for rates products and lower revenue in equities and commodities. Shares were slightly lower premarket, but have gained 31%n the year to date, while the S&P 500
SPX,
0.33%

has gained 10%.