Wells Fargo Q1 profit beats forecasts, despite scandal

Katie RamirezApr 14, 2017

On 8/8/2016 Timothy J Sloan, COO, sold 20,500 with an average share price of $48.92 per share and the total transaction amounting to $1,002,860.00.

JPMorgan also reported solid loan growth in the quarter across both its consumer and business lending businesses. And in two weeks, Wells Fargo will hold its annual shareholder meeting amid a push to get rid of the company's board of directors. JPMorgan expects to add another US$400 million to its net interest income in the second quarter.

However, the bank's expenses for salaries and other non-interest costs rose by almost four times that amount due to higher legal costs and greater spending on compliance programmes.

JPMorgan's stock fell $1, or 1.2 percent, to close Thursday at $84.40. Profit rose to $1.00 beating the average analyst estimate or $.97 cents. The recent uptick in interest rates has crushed a wave of mortgage refinancing that kicked off in 2010, leading to big declines in mortgage banking revenue. Analysts had expected $1.24.

Consumers opened 35% fewer checking accounts with Wells Fargo in March than they did the same period a year ago, the bank said Thursday.

Over the last twelve months Wells Fargo & Company's stock price has increased from 47.55 to 51.83, a change of 8.99%.

However, Citi's consumer banking division saw a drop in profits. Mortgage banking posted a drop to $1.5 billion in income for Q1 2017 from Q4 2016's $1.6 billion.

Among the reforms, Wells Fargo has addressed a "siloed" corporate structure that meant the problems in retail banking were not scrutinised more broadly.

With the fewest US branches of any large competitor, Citigroup is counting on its credit-card franchise to drive growth in North America.

Credit-card applications plunged by 42 percent, to 200,000, during the first three months of the year, the bank said in its earnings release.

Wells Fargo & Co, which has been mired in litigation stemming from a sales scandal, posted a almost flat first-quarter profit, hurt by lower mortgage banking revenue and higher expenses, Reuters reported.

That's on top of the $185 million fine Wells Fargo paid previous year when news of the scandal first broke, and much more than the $40 million to $50 million the bank had expected to spend on those costs for the quarter when it last reported earnings in January.

Both banks also benefited from lower reserves compared with the January-March period past year, when they set aside hundreds of millions of dollars to protect against the possibility of energy defaults due to the oil industry slump.

Wells Fargo is paying hundreds of millions of dollars to fix the damage from its sales scandal in which employees opened as many as 2 million fake accounts for consumers without their permission.

"Clearly we have had a very hard period in our history", Timothy Sloan, Wells Fargo's chief executive officer, told analysts during a conference call to discuss the results.

The company has established a "rebuilding trust office" that includes staff dedicating 100 per cent of its time to implementing the consent decrees with regulators.

If the Trump administration's deregulation and tax reform policies never get through, Goldberg said: "As long as the USA economy continues to expand we think [shareholder] downside is fairly limited".

San Francisco-based Wells Fargo generated $22 billion in revenue during the January-through-March period, down 0.9 percent from the year-ago first quarter. Its adjusted revenue was $22 billion, falling short of Street forecasts of $22.13 billion, according to Zacks.

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