Wells Fargo posted a first-quarter profit that topped analyst estimates though the lender still struggled to rein in expenses in another reminder of its long road to getting costs under control.
The firm reported net income of $4.74 billion boosted by a larger-than-expected release of loan-loss reserves. The bank’s noninterest expenses were $14 billion, a touch higher than analysts forecast while net interest income was lower than expected.
“Our results for the quarter, which included a $1.6 billion pretax reduction in the allowance for credit losses, reflected an improving U.S. economy, continued focus on our strategic priorities, and ongoing support for our customers and our communities,” CEO Charlie Scharf said. “Charge-offs are at historic lows and we are making changes to improve our operations and efficiency, but low interest rates and tepid loan demand continued to be a headwind for us in the quarter.”
Under Scharf, who took over in late 2019, Wells Fargo has been streamlining operations to improve profitability after years of scandals. The firm announced sales of its asset manager and corporate-trust unit during the first quarter, as well as its private student-loan book in December. The firm’s rail-leasing unit also is on the chopping block, Scharf said in January. The CEO has repeatedly lamented the firm’s high costs and pledged to eventually shave $10 billion off annual expenses. In January, Wells Fargo’s leaders said they have more than 250 separate expense initiatives that will take three to four years.
The firm remains under costly Federal Reserve-imposed restrictions that limit assets to their level at the end of 2017. In one of the first signs of success in the drive to escape the penalty, the company secured the Fed’s acceptance of a proposal it submitted last year.
Still, much work remains as the firm works to complete the next steps needed to lift the punishment: adopting the plan and undergoing an independent review. Bloomberg reported in December that a number of top executives privately expect Wells Fargo won’t escape the asset cap before late this year, while key Fed officials see the process dragging into 2022 or beyond.
