Wells Fargo has beaten expectations sending its share price higher, though profit fell seven per cent
US bank Wells Fargo has reported that its profits dropped by seven per cent over the last three months compared to last year.
The bank, the third-largest bank by assets in the US, posted profits of $5.5bn (£3.9bn), compared with $5.8bn in first quarter 2015. Revenue tracked upwards however, rising four per cent to $22.2bn.
JP Morgan and Bank of America both posted a decline in revenue for their first quarter earlier. Analysts had pencilled in revenue for Wells Fargo of $21.61bn.
Earnings per share managed to come in ahead of expectations at $0.99 per share, compared with $1.04 in the same period last year.
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Analysts were expecting adjusted earnings per share of $0.97 on revenue of $21.61 billion, according to a Bloomberg poll.
Shares fell during pre-market trading but managed to regain ground and were up by almost half a per cent in early afternoon trading in New York.
John Stumpf, chairman and chief executive said:
Wells Fargo's first quarter results reflected the benefit of our diversified business model as we managed challenges presented by a volatile operating environment for our industry. We again generated solid growth in the fundamental drivers of long-term value creation: loans, deposits and capital.
The San Francisco based bank charged off $204m in energy loans, up around 75 per cent from the previous quarter.
The bank also added $200m, compared with a $100m reserve release in first quarter 2015, to funds for loans that could go bad due to the problems facing its oil and gas loan book.
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The increase in loan losses reserves is the first time since 2009 that Wells Fargo built up reserves for instead of releasing them.
Mike Loughlin, chief risk officer said:
While substantially all of the loan portfolio continues to perform well, the oil and gas portfolio remains under significant stress due to low prices and excess leverage in this industry. The increases in losses and nonperforming loans in the first quarter were primarily due to continued challenges in this portfolio.
The bank's mortgage arm earned $1.6bn in fees in the first quarter, up three per cent from the $1.55bn it earned in same period a year ago.