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Wells Fargo's Q1 profit rises 16% as cost cuts pay off

13 April 2019

The San Francisco-based bank said Friday it had earnings of $1.20 per share compared with 96 cents a year earlier.

Net income was reported as $5.9 billion, compared with $5.1 billion in first quarter 2018.

Wells Fargo on April 12 reported $5.5 billion of earnings attributable to common shareholders for the first quarter of 2019, in its first set of results since Tim Sloan resigned as the US bank's chief executive. The Berkshire Hathaway (BRK.A, BRK.B) CEO is now Wells Fargo's largest shareholder, holding over 440 million shares of WFC stock.

Wells Fargo's regulatory challenges stem from a scandal at the nation's fourth-largest lender that involved the creation of millions of fraudulent customer accounts.

The Federal Reserve has signaled it is unlikely to raise interest rates in 2019 given risks to the USA economy from a global slowdown, which investors have feared could pressure net interest income, or the difference between what a bank earns on loans and pays on deposits.

Wells Fargo &Co (NYSE:) reported first quarter that beat analysts' expectations on Friday and revenue that topped forecasts. The higher efficiency ratio indicates that the bank is spending more money than it is making, according to CNBC. Interim CEO Allen Parker said it has "more work ahead".

Net interest income fell $333 million from last quarter to $12.3 billion due to fewer days in the quarter, balance sheet mix and repricing, and the impact of a flattening yield curve.

JPMorgan's news release included positive commentary on the U.S. economy, although the bank did boost its provisions for credit losses following downgrades on some commercial and industrial clients. He did not give a timetable for when a new CEO might be announced.

"Numerically, for the quarter, earnings were okay but management dropped guidance, in particular, for net interest income for the full year", Morningstar analyst Eric Compton said.

Wells Fargo also appeared more cautious on the economy than other banks reporting on Friday.

David Long, managing director of equity research at Raymond James & Associates, also noted that noninterest income came in lower than expected in the quarter and loan growth was pressured by declines in all categories except commercial real estate.

A Quarterly Performance (Q-P) of -0.02%, bringing 06-months performance to -10.96% and year to date performance (Y-D-P) of 3.71%.As of now, Wells Fargo & Company has a P/S, P/E and P/B values of 3.38, 11.07 and 1.29 respectively. Compared to the same quarter previous year, the firm's revenue was down by -6.42%. Non-interest expense fell 7.3% to $13.9 billion. Revenue declined slightly to $21.6 billion from $21.9 billion. The bank's efficiency ratio was also 64.4% for the quarter, also above estimates. Average loans also decreased to United States dollars 950.1 Billion, falling by USD 876 Million a year prior.

Wells Fargo's Q1 profit rises 16% as cost cuts pay off