why does it matter
Wells Fargo is one of the nation’s largest mortgage lenders, and analysts are watching its results for signs of economic stress. The bank’s non-performing loans grew in its business, but its consumer business remained fairly flat, with an uptick in credit card defaults offset by a drop in auto loan losses.
The US economy “continues to do better than many expected, but there is likely to be a continuing economic slowdown,” said Charles W. Scharf, the bank’s chief executive officer. Shares of the bank were up 4 percent in pre-market trading.
Commercial real estate, especially loans on office space, is a pain point, and the bank has set aside nearly $1 billion more for losses. Its deposits — a measure that has been in check this year as customers seek higher returns on their savings — were down slightly from last quarter.
Business deposits have stabilized, while on the consumer side, “what’s driving the decline is, to a large extent, people are spending their money,” said Michael B. Santomassimo, CFO of the bank.
Wells Fargo continues to operate under growth constraints imposed by the Federal Reserve in 2018 in response to the bank’s high-profile crimes, including creating bogus customer accounts and mishandling payments on customers’ auto loans and home loans. The bank expects the penalty to remain in place for at least the next year.
Like other big banks, Wells Fargo continues to brace for a recession — but doesn’t see one yet. “Overall, I think things are going very well,” said Mr. Santomassimo, thanks in part to “a really strong employment picture.”. “
More big banks will report quarterly earnings next week, including Bank of America, Morgan Stanley and Goldman Sachs.