Wells Fargo released its first quarter results report Thursday (April 14), showing a drop in revenue – a 20% drop in profits from a year ago – and a 33% drop in home loans.
“The Federal Reserve has made it clear that it will take the necessary steps to reduce inflation and that will certainly reduce economic growth,” CEO Charlie Scharf said in a statement. statement.
He added that “the war in Ukraine adds additional downside risk,” saying the bank was well placed to meet customer needs in a slowing economy.
Scharf said Wells Fargo should see an increase in loan losses, but the bank should be “a net beneficiary because we will benefit from higher rates, we have a strong capital position and our weaker expense base creates higher margins from which to invest.”
The report said retail and small business banking grew 11%, primarily due to a higher deposit balance, higher deposit fees and higher credit card transaction volumes. throughput, offset somewhat by lower revenue from Paycheck Protection Program loans (PPP).
The decline in home loans was “primarily due to lower mortgage banking income due to lower originations and lower sales gain margins, as well as lower interest income from loans purchased from securitization pools, partially offset by the increase in income from the management of mortgage loans”.
Wells Fargo also said it released funds set aside for potential losses due to “reduced uncertainty around the economic impact of the COVID-19 pandemic on our loan portfolios, as well as a decrease in net imputations”.
The bank’s profits were boosted by a $1.1 billion drop in provisions for credit losses, a reduction that Wells Fargo said added 21 cents to earnings per share.
See also: Wells Fargo’s ‘Rewards for Rent’ card leverages points as a monetary incentive
Among the products and services highlighted by Scharf in its report is Wells Fargo’s recent partnership with real estate startup Bilt to launch a card that allows customers to earn points and miles on rent payments.
The Bilt card was first launched last year by Mastercard, and cardholders can use it to pay rent for any home or apartment free of charge. With each payment, cardholders accumulate points, which can be used for items such as travel, rental credits and to make a down payment on a home.